North Carolina Legislative Committee Recommends Cap On Local Business Taxes

Date: April 17, 2014

The Proposal Follows Recent Reforms To The Tax Code

North Carolina state legislators are moving toward a proposal to change how small businesses are taxed. Specifically, a tax study committee last week agreed to draft legislation that the general assembly is expected to take up next month that would create a more uniform system for taxing small business.

What Would The Proposed Legislation Do?  Currently, cities and municipalities create their own rules for taxing businesses, which can result in much higher privilege taxes in addition to income taxes. The proposal would institute a uniform flat tax for local businesses, which would eliminate the differences across the state in taxing similar businesses. The small business sector is applauding the legislature’s efforts to make the system more coherent, but some critics of the proposal argue that cities and municipalities would be forced to increase property taxes in order to make up for lost revenue. Cities and municipalities have been especially vocal in their criticism. Charlotte, for example, stands to lose about $8 million in revenue, and Raleigh about $3.4 million, in fiscal year 2015-16.

What About The Recent Tax Overhaul?  The committee’s move to push forward this legislation follows North Carolina Gov. Pat McCrory’s signature into law of an overhaul to the tax code that will take effect next year. The new law simplifies the personal tax rate, lowers the corporate tax rate, caps the gas tax and repeals the estate tax. These reforms allow both individuals and businesses to keep more of their money, increasing North Carolina’s competitiveness.

Further Reading:

The Triangle (NC) Business Journal and the AP reported on the North Carolina legislature’s agreement last week to study a draft proposal which would repeal the current system of calculating local business privilege tax. NBC News and WTVD-TV reported on Gov. McCrory’s comments this week regarding the benefit of the new tax system.

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This news article is intended to keep small business owners apprised of current events that may affect them. It does not necessarily reflect NFIB’s policy position on such issues.

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