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McCrory signs tax reform 'restoring confidence for NC businesses'

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Gov. Pat McCrory signed "comprehensive tax reform" into law Tuesday, capping the income tax for all individuals at 5.8 percent and reducing the corporate tax to 6 percent in 2014. (Steve Sbraccia, WNCN) Gov. Pat McCrory signed "comprehensive tax reform" into law Tuesday, capping the income tax for all individuals at 5.8 percent and reducing the corporate tax to 6 percent in 2014. (Steve Sbraccia, WNCN)
RALEIGH, N.C. -

Gov. Pat McCrory signed "comprehensive tax reform" into law Tuesday, capping the income tax for all individuals at 5.8 percent and reducing the corporate tax to 6 percent in 2014.

Flanked by legislative leaders, McCrory said the reform package will "prove to be critically important to growing North Carolina's economy and getting people back to work."

"This tax reform package puts more money in families' budgets and will restore confidence for North Carolina businesses," McCrory said. "Because of this package, job creators will think about relocating to our great state."

In a statement, House Speaker Thom Tillis (R-Mecklenburg) called the state's tax system "archaic," and said it "punished success and ignored the needs of a modern society."

"Through those years, many have tried and failed to bring true reform to the system in a way that benefits every taxpayer," Tillis said. "Today, we are accomplishing what others could not by signing into law a historic measure that will bring tax relief to our citizens and make our state more competitive for economic development and job creation."

According to an analysis by the legislature's non-partisan staff, a family of four earning $40,000 per year, filing jointly, would save $100 per year. That same family of four, earning $150,000, would save $750 per year. And a family of four, earning $250,000, saves $2,400.

One of the biggest changes is reducing corporate taxes from 6.9 percent to 6.0 percent in 2014 and eventually down to 3 percent in 2017, provided certain conditions are met. It also caps mortgage interest and real estate taxes at a $20,000.

To generate revenue the bill applies an increase in sales tax to electricity, movies and service contracts. It also eliminates the popular back-to-school sales tax holiday as well as the Energy Star tax holiday in 2014.

Tillis said the package would result in roughly $500 million less in revenue through mid-2015.

Democrats argue the bill helps the wealthiest and large out-of-state corporations at the expense of working families.

The bill maintains a $1,500 cap on the sales tax for a yacht or a jet, as well as exempts country clubs from corporate income tax.

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