One person who has been closely following the North Carolina debate says a deal will include probably a lowering of the state corporate income tax from 6.9 per cent to 6 per cent in 2014 and 5 per cent in 2015, with triggers allowing further decreases if certain revenue targets are met. The individual income tax would fall from 7.75 to 5.75 per cent by 2015 .
The price tag would be partly covered by expanding the state’s sales tax base and would also be offset by the expected expiry in tax breaks for low-income working families, but could still end up costing about $450m in revenues each year.
The bill’s defenders claim the new reform wave will improve the state’s dismal 8.8 percent unemployment rate (third worst in the country) by making it more business friendly. Critics see the bill as, at best, leaving a gaping whole in the budget to fund basic services and, and worst, favoring the state’s rich at the expense of the poor.
North Carolina has become a key battleground for cherished GOP policies. Now that the House and Senate have agreed on significant cuts in corporate and individual income taxes, in addition to cuts in jobless benefits and eliminating the estate tax, the experiment can begin in earnest. Will these new policies attract business to North Carolina and spur much needed growth? Or will they hurt those most in need and doom the GOP to failure in future elections?
So far, Republican leaders haven’t come up with many pro-growth policies other than tax cuts, and their reform measures seem to divide electorates everywhere they appear (even in deep red states like Kansas and Louisiana). Unless and until North Carolina rebounds from its dismal economic situation as a result of these new reforms, many voters will be hardened in their impression that Republicans are singularly austerity-minded and favor the rich over the poor. The party can’t afford to lose favor among the electorate any more than it already has.