Reduce the N.C. income tax

Legislators OK'd a `temporary' increase in 2001. It's still there.

From Bob Morgan, president of the Charlotte Chamber of Commerce:

A key part of the Charlotte Chamber's mission is to be a voice for business. I write this to commend activity in the N.C. General Assembly to reduce the tax rate for the highest bracket of the personal income tax schedule.

In 2001, members of the General Assembly made up a gap between state revenue and spending by raising the personal income tax rate to 8.25 percent for individuals whose taxable income is $120,000 or more for singles and $200,000 for married filing jointly. The increase from 7.75 percent was proposed to be temporary, but it remains to this day.

Since that time, the Charlotte Chamber has advocated for a reduction in that tax. We are encouraged to see a reduction proposed in both the Senate budget to 8 percent and in the House budget to 8.125 percent. We encourage members to adopt a final budget with at least the full quarter percent reduction as proposed by the Senate.

Many small business owners pay personal income taxes on the income generated in their business rather than paying corporate income tax. How a business is organized determines which tax will be paid. Sole proprietorships, partnerships, limited liability companies, subchapter-S corporations and other small businesses pay according to the personal income tax schedule. A reduction in the top personal income tax rate represents bottom-line savings to many small businesses, much of which can be expected to be reinvested and contribute to North Carolina's continued economic growth.

A reduction in the top personal income tax rate also makes North Carolina more competitive in the retention and recruitment of headquarters firms that provide highly compensated jobs.

A cut in North Carolina's corporate income tax rate would have the same effect. Unfortunately, such relief appears unlikely in this legislative session.

Our state has an opportunity to tell small business owners and executives who make decisions about keeping and relocating jobs in North Carolina that we want them here. We commend the members of the General Assembly for making good on the promise that the increase in the personal income tax rate is temporary.

For The Record offers commentaries from various sources. The views are the writer's, and not necessarily those of the Observer editorial board.