RALEIGH, N.C. -- Republican legislative leaders and GOP Governor Pat McCrory said Monday they've reached an agreement on tax reform.
At a news conference Monday afternoon, McCrory called it a "meaningful" and "historic" deal that will spur economic development and put money into the pockets of North Carolina taxpayers.
The deal still has to be approved by the full General Assembly and signed into law by the governor.
"We've waited long enough for this," said parent Dorothy White of Winston-Salem. White believes it's a step in the right direction. "It's a start. I feel like we have a lot more to go but I think its a great start we have to start somewhere."
Senate leader Phil Berger said the deal will lower income tax rates for all taxpayers to 5.8 percent in 2014. The corporate tax will be reduced to 6 percent in 2014 from 6.9 percent. It would drop all the way to 3 percent by 2017 in yearly increments.
"We need a little more in our pockets," said Lloyd Lennon of Winston-Salem. He and his wife Margaret believe tax overhaul is long over due. "We need a whole lot of reforms," said Margaret.
McCrory said a lower corporate rate will make North Carolina more competitive with its neighbors and put more people to work.
"It's a signal that North Carolina is open for business," said McCrory.
Other highlights include:
Personal Income Tax
- Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and 5.75% in 2015.
- Increases the standard deduction for all taxpayers, applied to the:
- First $15,000 of income for those married filing jointly
- First $12,000 of income for heads of household
- First $7,500 of income for single filers;
- Retains the state child tax credit and increases it for families making less than $40,000;
- Offers a $20,000 combined maximum deduction for mortgage interest and property taxes;
- Makes charitable contributions fully deductible;
- Protects all Social Security income from state taxes.
Corporate Income Tax
- Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 a 29% rate reduction.
- If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017.
- Caps the state gas tax;
- Eliminates North Carolina's death tax;
- Preserves the sales tax refund for nonprofits.
Other attempts at tax reform over the past two decades have failed. Advocates of tax modernization and legislators have said North Carolina's tax system is outdated - originating from a 1930s economy of textiles and furniture. Today's economy relies more on the service and technology sectors.
The tax negotiations have delayed the passage of the state budget.
WTVD contributed to this report.