Raleigh, NC - Critics call it regressive, supporters call it necessary, and for all North Carolinians, the question is not if a tax cut is coming, but how much it will be and who it will benefit.
Republicans are busy preparing for their first legislative session since their Election Day sweep that gave them control of the General Assembly and Governor's Mansion for the first time since 1870, and tax cuts will be one of the first item on their agenda according to Senate President Pro Tempore Phil Berger.
Completely eliminating both the personal and corporate income tax is an idea being discussed in Raleigh, and before even beginning the session, Republicans and Democrats are divided on the issue.
Sen. Berger told News 2's Patrick Phillippi a reform in the state's tax code is decades overdue, saying, "Our tax rates are not very competitive for us. We have the highest marginal income tax rates in the southeast and some of the highest marginal rates in the country. If we expect to win the competition for jobs with other states then we've got to reform our tax code."
North Carolina would be the only state in the southeast with no corporate income tax and would join Florida to become the second southeast state with no personal income tax.
Tennessee taxes only dividend and interest income.
Many Democrats are highly critical of the plan and say it is regressive, punishing poor people while benefiting the rich.
Representative Alma Adams, (D, Guilford County), told News 2 that tax reform is something to look at, but disagreed with the zero percent corporate/personal income tax pairing, saying, "Anybody who spends most of their money on food and essentials, those are the people buying this, their taxes will go up."
Adams went on to say, "Many people don't have jobs and they are working two or three jobs to make ends meet. I think the impact might be greater than we think. I'm hopeful we are thoughtful in this process to make sure it is fair."
Sen. Berger addressed critics who think the tax is unfair and told News 2 this reform would increase the tax base, and help the state weather economic volatility. Berger said, "What we've seen over the years is because of the change in our economy, a larger and larger portion of the cost of government is being born by a smaller and smaller slice of economic activity. So, what we want to design is a tax system where the taxes are born by a broader section of the population. In that way, we reduce the violent swings in tax collections when the economy doesn't do very well."
The biggest piece of the puzzle still unanswered is how to pay for it.
Personal income taxes make up about fifty percent of the state's $20 billion budget. Sen. Berger said discussions were very early and they would know more on details once a more formal proposal is put in place.
In the meantime, there is little Democrats in Raleigh can do to block Republican's agenda.
Their majority in both the State Senate, State House, and Governor's Mansion gives them full control of the legislative agenda.
WFMY News 2