States are Deciding to Lower Taxes
As states recover from the pandemic economy, many are looking for ways to improve quality of living and incentivize both taxpayers and businesses to call their state home. Out of the 50, 11 states have already passed legislation to lower state taxes after the widely successful FY 2021, and now North Carolina is proposing legislation that would benefit a group of taxpayers who have been recognized for their front-line efforts during the global pandemic.
Currently, the average teacher salary in the U.S. is $60,000, ranging from $45,000 in Mississippi to almost double that in New York. These values represent those of an experienced teacher. First time teacher salaries are often significantly lower and under the livable wage in most states. The average teacher salary for North Carolina is $54,000, only $6,000 more than the cost of living in North Carolina.
What is North Carolina Proposing?
The North Carolina House of Representatives proposed a $25.7 billion budget that will contain funds for teachers and state employees, along with internet expansion, infrastructure, capital projects, and other initiatives. Governor Roy Cooper illustrated the proposed changes including investing more in education and childcare, expanding medicaid, and getting rid of policies that could jeopardize certain organizations. If this proposal is passed, NC residents will see changes beginning in January of 2022.
The proposed House budget would raise teacher salaries by an average of about 4% the first year, totaling 5.5% over 2 years. State employees would receive a 2.5% raise each year for the next two years, for a total of a 5% boost in two years. This includes custodians, bus drivers, and other non-certified school personnel. Bonuses are also included in the proposal.
Republican Jeffrey Elmore explained that the goal is to focus on future problem areas, such as recruitment and retainment of teachers and state employees, as well as to repay those that were “on the frontlines” during the pandemic.
Other Tax Benefits Included in the Proposal
Compared to the Senate’s proposal of 3.99%, the House proposes to lower the individual income tax rate even more to 4.99%. The standard deduction for married couples filing jointly and single taxpayers would increase to $25,500 and $12,750 respectively. Additionally, the corporate income tax would be reduced to 1.99%.
As state tax laws are changed and legislation is proposed that incentivizes businesses and taxpayers to look more closely at a particular state, investors and entrepreneurs should also take into consideration how each state conforms to the hugely beneficial tax code in Section 1202. This section illustrates the benefits of investing in a Qualified Small Business and how the stock can be eligible for up to 100% federal tax deduction. However, not all states treat this code equally.
Visit qsbsexpert.com to learn more about how each state recognizes the benefits of QSBS.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
