Republican state lawmakers say they want to consider tax cuts this year, thanks to better-than-expected revenue projections.
Fears of a looming economic recession last year prompted lawmakers to scuttle plans to cut taxes. But new revenue projections out this month show a potential $3 billion surplus — about 10% of the state’s overall budget.
That’s due to high corporate profits and consumer spending, according to state government economists.
“The state's fiscal situation is very, very strong,” Senate President Pro Tem Phil Berger told WUNC. “I've been in the legislature for 20-plus years. It's the strongest it's ever been since I've been here.”
Berger says his goal is to cut the state’s personal income tax rate, which is currently at 4.75%.
“As long as we are collecting more money than we're needing to appropriate, that extra money — some of it needs to go back to the people, and reducing their tax burden is one way to do that,” he said.
House Speaker Tim Moore says he wants to consider more cuts to business tax rates as well.
“We're looking at personal income tax, we're looking at corporate income tax, we're looking at the franchise tax,” Moore said. “We're looking at a number of taxes that we can help give some relief.”
Democrats, however, disagree with the approach. They filed bills last week that would repeal corporate income tax cuts already scheduled to begin in 2025. Current law would fully eliminate the current 2.5% corporate tax by 2030.
Rep. Marcia Morey, D-Durham, and Sen. Lisa Grafstein, D-Wake, are sponsoring the bills, which are called “Make Corporations Pay Their Fair Share.” That measure is unlikely to get a hearing in the GOP-majority legislature.
Moore says the House budget proposal could be released as soon as April. Lawmakers hope to get a budget to Gov. Roy Cooper by the end of June.
While projections for the current fiscal year show a surplus, the revenue forecast further into the future isn’t as rosy.
It shows slight declines in state revenue from the fiscal year that begins in July through 2025.
“The economic forecast underlying the revenue forecast reflects a “slow-cession” characterized by stagnant real growth in the economy over an extended period in 2023, followed by a period of slow growth,” the economists wrote.