The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.
Bloomberg BNA recently posed a series of tax-centric questions to the Republican and Democrat candidates for governor in North Carolina. Below are the responses from Republican incumbent candidate Pat McCrory.
Interview by Andrew M. Ballard
Pat McCrory grew up in Jamestown and graduated from Catawba College with a degree in education and political science. After earning his North Carolina teaching certificate, he joined a management training program at Duke Energy, where he worked his way up the ladder (literally) from digging ditches and climbing telephone poles to various jobs in human resources and economic development. Before being elected the 74th governor of North Carolina, Pat McCrory was the longest-serving mayor of Charlotte. He and his wife, Ann, have a rescued labrador retriever mix named Moe.
What are your priorities related to state and local tax, if elected?
When I took office, North Carolina had an out-of-date, 60-year-old tax code that left us with the highest income and business income taxes in the Southeast and uncompetitive for jobs. Since taking office, we have lowered the tax burden by $4.7 billion over five years, including for the middle class and small businesses. Personal income taxes have been reduced from a high 7.75 percent to a low, flat 5.499 percent, and business income taxes have been reduced from almost 7 percent to 3 percent.
The nonpartisan Cato Institute called our reforms “one of the most impressive tax reform packages in any state in years,” helping North Carolina to create over 300,000 jobs and experience one the fastest growing economies in the nation. Over the past three and a half years, North Carolina's tax climate improved more than any other state in the country, improving from 44th in 2013 to 11th this year. Because we cut taxes, North Carolina is now much more competitive with its neighbors for jobs, but we should continue to evaluate ways to stay ahead of our competition.
What existing state and local tax measures or initiatives would you seek to support? Or curb?
This year, we built on our pro-growth tax reforms by providing a middle-class tax cut that will save taxpayers about $145 million over the next year alone. By increasing the personal income tax standard deduction by $2,000 over two years for married filing jointly and proportionately for other filers, the budget puts more dollars in the paychecks of North Carolinians and eliminates income taxes for approximately 75,000 taxpayers.
We should let the ink dry on these changes, but we should continue to look at additional changes to reduce the tax burden for hard-working North Carolina families and evaluate ways to stay ahead of our competition.
What is the biggest hurdle you foresee to enacting your major tax-related initiatives?
We have taken steps to make our tax reductions responsibly without jeopardizing state revenue for critical services like education, transportation and public safety by phasing in changes over time and utilizing revenue triggers. North Carolina has experienced major revenue surpluses thanks to a stronger economy and more people earning a paycheck. With so many important and rapid changes, it is important to monitor the impacts of tax reform going forward on the overall economy.
What is the biggest challenge you see facing North Carolina from a tax and revenue perspective, in light of current and evolving market conditions?
We have made a concerted effort to responsibly put money into our rainy day fund to guard against the possibility of a major national economic downturn. Under my administration, North Carolina has more than tripled the rainy day fund by increasing reserves to $1.6 billion—the largest rainy day fund in state history.
Do you believe North Carolina has the right balance right now in terms of overall taxes? Does anything need to be re-balanced?
When I took office, North Carolina was too reliant on income taxes, meaning that we were susceptible to large swings in state revenue during economic downturns. We believe our tax reforms have significantly improved the overall balance within our state, but we will continue to evaluate state revenue and determine if any additional reforms can be made to position North Carolina as the best place to live, work, raise a family and retire.
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