Incoming legislature, governor may consider no NC income tax

by: Scott Wickersham Updated:


CHARLOTTE, N.C. - Now that Republicans control the legislature and governor's mansion in North Carolina, there is more discussion about changing the state tax code.

One plan is to eliminate the income tax North Carolina takes out of paychecks and expand the sales tax to cover more things people buy every day.

It's one idea lawmakers will take a serious look at when they return to the capital in January.

"Income tax is detrimental to economic growth, investment and job creation," said Republican state Sen. Bob Rucho from Mecklenburg County.

Rucho said the idea of eliminating the state income tax is one he and his colleagues would consider to make North Carolina competitive and business-friendly again.

"The system has failed. It's no longer an option, and we need to find an alternative to it," he said.

The state would no longer take a tax out of residents' paychecks but in turn would put sales tax on services like those provided by doctors, lawyers and car repairs.

It could also raise the sales tax on things like food, which is now capped at a lower rate.

Economist John Connaughton said there is plenty of revenue to go after.

"There are certain segments of the economy where we pay reduced tax, and the rest, probably 70 percent of it, that are in the service area," Connaughton said.

Gov.-elect Pat McCrory has vowed to support tax reform, so the legislature would have an ally.

Is there a real chance this could happen?

Brian Balfour of Raleigh think-tank Civitas said only one state has pulled it off.

"The lone exception would be Alaska. They did it in 1980 on the back of a huge pipeline. They had a lot of royalty revenue coming in from that," Balfour said.