Dear Legislator:
On behalf of National Taxpayers Union’s nearly 8,800 North Carolina members, I urge you to support the substantial taxpayer relief proposal known as the North Carolina Tax Fairness Act, introduced yesterday by Senate President Pro Tempore Phil Berger. This well-balanced and farsighted plan would lower personal and corporate income taxes, cut the franchise business tax, abolish the death tax, and lower the sales tax rate while broadening the base. While all types of taxes can harm a state's economic health, the income tax causes the most economic damage per dollar collected. It penalizes workers for working harder, longer, or smarter, and it penalizes investors for providing the capital improvements that make workers more productive. Reducing income taxes would make North Carolina a better place to start a business and would allow taxpayers to keep more of their hard-earned money.
As family incomes continue to decline and unemployment remains dangerously high in the Tar Heel State, the time is now for pro-growth tax reform. North Carolina's top individual income tax rate is higher than any state in the South, and a reduction to the top rate from 7.75 percent to 4.5 percent over three years would provide taxpayers much-needed relief while fostering a rise in gross state product. The benefits of maintaining low or no income taxes are well-documented, and moving North Carolina in that direction would be a smart decision for lawmakers. According to the American Legislative Exchange Council’s Rich States, Poor States study, from 1999 to 2009 the nine states with no personal income tax—including nearby Tennessee and Florida—experienced an average rise in gross state product of 61.2 percent, while the nine states with the highest personal income tax rates grew by only 44.9 percent.
Additionally, states without income taxes have actually outpaced their counterparts in terms of revenue growth. From 1999-2009, states without income taxes saw a 123.7 percent increase in total tax collections compared to the national average of 70.2 percent. When combined with ongoing expenditure restraint, this kind of strong economic and revenue performance is a recipe for consistently stable and balanced budgets. The Tax Fairness Act would not completely eliminate income taxes, but easing the burden of state income taxes in North Carolina – now significantly above the national average – could go a long way toward securing the state’s fiscal future.
Furthermore, legislators should strive to make North Carolina a better place to start and expand a business – especially given the fact that states compete with one another for economic activity and jobs. Lowering the corporate tax rate to 6 percent and reducing the franchise tax by 10 percent would benefit all businesses in the state, regardless of what they might manufacture, deliver in services, or sell to consumers.
With higher federal tax rates and soaring health care costs, your constituents would be best served by tax policies that emphasize fiscal discipline and economic prosperity. As such, I hope you will support the Tax Fairness Act, the most important tax cut in North Carolina’s history.
Sincerely,
Lee Schalk State Government Affairs Managercc: Governor Pat McCrory