Outline - Tax Admin

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BarryBoardman,Ph.D.ChiefEconomist FiscalResearchDivisionNorthCarolinaGeneralAssembly

PresentaDonforFTASunValley,IdahoSeptember21,2010

Outline  State’staxstructure  Reformstudies  RecentaNemptatreform  Results–Whatwasenacted  LessonsLearned

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Tax Rate

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 GoalsandConclusions  Expandmajortaxbasesandlowerrates  Providestablerevenues  Eliminatetaxcomplexity  Eliminatenon‐discre<onaryincen<ves

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 TaxReformGoals  Broadenbasesandlowerrates  EliminatemostcreditsanddeducDons  Treatsimilarbusinessesthesame  Simplifytaxcode

  Reduceallratesandsimplify(toprate7.75%,2008)   Startcalcula<onwithAGI(27otherstates)   Createnewzerobracket(0%upto$10,000,MFJ)   AGIexcludesonly:

  Earnedincometaxcredit   Perchildcredit,$125andretaindependentcarecredit   6%mortgagecredit,$10,000cap(primaryresidence)   6%charitablecredit,20%AGIcap   6%medicalcredit,federaleligibility   RetainrefundablecreditsandR&Dcredit

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 Applyfranchisetaxtoalllimitedliabilitybusinesses

  RepealStateandlocalprivilegelicensetaxes   ReducerateoreliminateCIT   RepealcreditsotherthanR&D,refundablecredits,andtargetedincen<ves

  Exemptdepreciableequipmentfromsalestax;applysalestaxtomostsuppliesandaccessories

  Expandtaxbase   Digitalproductsandclick‐

throughs   WarranDes,installaDons,

andrepairstoTPP   Convertamusements/

movieprivilegetaxtosalestax

  RecreaDonandentertainment

  Homeandrealproperty   Storageandmoving

  Expandtaxbase   Buildingrepairsand

alteraDons,notincludingnewconstrucDon

  Web‐basedandotherinformaDonservices

  Eliminatesomerefunds   Eliminatesome

exemp<ons   Transferexpandedlocal

basetoState

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  Senateintroducedthe21stCenturyTaxRateReduc2onandModerniza2onPlan

  Conversa<onswithSenateleadershipandcaucuses,HouseFinancechairs,andGovernor

  PlanpresentedtotheSenateFinanceCommi\eeonApril22,2009

 Mee<ngswithstakeholders,publicgroupssuchastheChamberofCommerce,etc.

  Budgetconferencecommi\ee

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TaxLawChanges,2009&2010

  Temporarysurtaxonincometaxes   TemporaryStatesalestaxincrease

  Expandsalestaxbasetoincludesomedigitalproducts

  Increasetaxrateonbeer,wine,andalcohol   Increasetaxontobaccoproducts   Expandedorextendedamyriadoftaxcredits,refundsandexemp<ons

  “…reformNorthCarolina’ssalesandincometaxstructureinordertobroadenthetaxbaseandlowertheState’staxrates.”

  StudyWebsitehNp://www.ncleg.net/documentsites/commiNees/jhsfctr/Homepage/index.html

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  Unifyingsupportforcomprehensivereformneeded   Needbipar<sansupport,bicameralsupportand

gubernatorialsupport   Keyisfullagreementoncoregoals

  Legisla<oncrahed   Needabill

  “Processreformmustextendtoallthebudget,notjustthetaxsystem”   EugeneSteuerle,Dec.12,2002,“TenGuidelinesforSystema<c

Reform”,TaxNotes(WashDC:UrbanIns<tute)

  Educatethepublicaswellasthemembers   Perceivedwinnersnotvocal;loserswerevocal

BarryBoardman,Ph.D.ChiefEconomistFiscalResearchDivision,NCGA919‐733‐[email protected]://www.ncleg.net/FiscalResearch/

ThankYou