By Theresa Opeka
North Carolinians are just weeks away from getting more money out of their paychecks, thanks to a new income tax cut. Last year’s legislative action in the 2021-22 state budget was recognized by Forbes nationally. The magazine lists the Tar Heel state as one of the top five for income tax cuts for 2023. Arizona, Iowa, Idaho, and Mississippi rounded out the top five.
North Carolina’s personal income tax rate of 4.99% will drop to 4.75%, down from 7.75% a decade ago, which made it the top income tax rate. especially in the southeast at that time. It is expected to rise to 3.99% in 2027.
Meanwhile, the corporate tax rate of 2.50% will be lowered to 2.25% in 2025 and phased out in 2030.
The budget also exempted military pensions from state taxes. North Carolina has the fifth largest military population of any state.
The magazine lists North Carolina as a leader followed by other states.
“By making the tax code not onerous and more competitive over the past decade, but doing it in a responsible way that didn’t lead to a budget deficit, changing the policy of the A tax implemented in North Carolina has been viewed by governors and legislators in other states as a model for pro-growth tax reform.”
This is not the first time North Carolina has been criticized for its mismanagement of taxpayer money.
North Carolina was listed in an August Pewtrusts.org article as one of five states that use a “budget stress test” to determine how much money should be allocated to the fund. money. Stress tests are used to prevent future crises after events such as recessions or hurricanes. It also allows MPs to see how the state budget is going in different economic sectors. California, Maine, New Mexico, and Utah round out the rest of the list.
North Carolina met its proposed rainy day fund goal when it significantly increased its fund with the passage of the 2022 budget.
Senate President Phil Berger, R-Rockingham, said in June that the $27.9 billion 2022-23 budget has a $6 billion surplus, of which $2 billion is expected to roll over. The Rainy Day Fund is estimated to have $4.75 billion at the end of two years. This is an increase from the 4.25 billion dollars estimated in the last budget. A government fund worth 1 billion dollars was also created in anticipation of the recession.
Legislative leaders say they won’t make the same mistakes Democrats did in dealing with the latest recession with a $3.5 billion deficit. In 2009, Gov. Bev Purdue, a Democrat with a Democrat-run legislature, temporarily cut teacher pay, instituted furloughs for state employees, and tapped into the state fund for spending urgent.
“This is a reminder of where we were in 2010,” House Speaker Tim Moore said in June. “Some of our predecessors were really unprepared for the economic downturn.”
The Tax Foundation also ranked North Carolina 10th in the nation for its tax environment.
As the nation faces its worst inflation rate in 40 years, a tax rate cut could give some North Carolinians a reason to celebrate the New Year in 2023.