Per WRAL:

The Senate had been scheduled to give its final blessing to a deal that would have curtailed revenue growth by some $4 billion over the next four years by cutting income tax rates. Unlike others plans, including those put forward by the House and prior Senate proposals, it would not have extended the state sales tax but it did potentially tax Social Security income.

However, immediately before the Senate was to debate the bill today, Senate President Pro Tempore Phil Berger pulled it from consideration.

“We are talking with the House and the governor,” Berger told his colleagues.

After session, Berger said that he was leading negotiations on the Senate’s behalf.

 The median North Carolina family would get a modest tax break while wealthy taxpayers may see a significant cut under a sweeping bill primed for a landmark House vote Friday.

A married couple with two children making $40,000 a year would get an estimated $40 tax break when the legislation is fully implemented, according to a new legislative analysis. If the same family earned $250,000 a year, it would see a roughly $1,700 break. The tax cut increases to at least $12,500 if the family makes $1 million.

Well, duh. Of course those paying a boatload of money in taxes will receive a larger break – dollar wise – than those paying relatively few dollars in state income taxes.

This does lead to the question: who does pay income taxes in NC? After all, the far left cling to a “progressive” income tax because they feel it is more “fair,” in that is compels those who earn more income to pay a larger percentage than those who earn less income.

The latest edition of the North Carolina Comprehensive Annual Financial Report (CAFR) shows a breakdown of who is paying state income taxes in NC.

The main findings (as of 2010):

• The bottom 51% of income earners paid 4.5% of personal income taxes (that’s four-point-five percent)
• The top 19% of income earners paid 71% of personal income taxes
• The top 6% of income earners paid 46% of personal income taxes

The Tax Foundation provides an excellent rundown of the two plans here.

Both plans would significantly improve NC’s tax climate, making the state more attractive for investment – which would result in more job creation. Better still, however, would be a plan to eliminate income taxes.

North Carolina first enacted a sales tax in 1933, it was promised to be “temporary.”  The rate was 3%. Food for consumption was exempted.

In 1961, the food exemption was repealed, subjecting groceries to the 3% state sales tax.

In 1971, the state authorized an additional 1 cent local sales tax for counties, adding to the total sales tax paid by consumers, including groceries.

The state authorized an additional one-half cent local sales tax in both 1983 and 1985, bringing total local sales taxes to 2%, and combined state/local sales tax to be paid by consumers to 5%, including groceries.

In 1985, North Carolina passed a law exempting the purchase of food with food stamps from the sales tax, this exemption would also apply to the local sales tax on groceries.

In 1991, North Carolina increased the state sales tax rate from 3% to 4%.

In 1996, the state passed a law to reduce the state sales tax rate on food from the standard rate of 4% down to 3%, effective Jan. 1, 1997.

The following year, state lawmakers passed another law lowering the state sales tax on food to 2%.

In the next year (1999), legislators eliminated the remaining state sales tax on food.

In sum, North Carolina has applied a sales tax on food since 1961.

• From 1961 to 1971, the rate was 3%, and it crept up to 5% by 1985. Remained at 5% until 1991.
• The rate topped out at a combined state/local rate of 6% from 1991 to 1996.
• From 1996 to 1999, the state sales tax on food was phased out.
• From 1999, the state no longer applied the state sales tax rate on food; however the local rate of 2% remained.
• Food purchased with food stamps was liable for the sales tax up until 1985.

Currently, food consumers pay the local 2% sales tax on most groceries, and the full 6.75% combined state/local rate on certain items including candy, soda, “prepared foods”* and dietary supplements. Food purchased with food stamps is exempt from both the state and local sales tax. North Carolina has 1.7 million food stamp recipients.

*Prepared food is defined as follows: Food that meets at least one of the conditions of this subdivision. Prepared food does not include food the retailer sliced, repackaged, or pasteurized but did not heat, mix, or sell with eating utensils.

a.         It is sold in a heated state or it is heated by the retailer.

b.         It consists of two or more foods mixed or combined by the retailer for sale as a single item. This sub‑subdivision does not include foods containing raw eggs, fish, meat, or poultry that require cooking by the consumer as recommended by the Food and Drug Administration to prevent food borne illnesses.

c.         It is sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins, and straws.

The N&O provides the details of the House tax plan in this article.

Of interest are three amendments that were proposed during the committee meeting, two of which were rejected and one that was approved. The approved amendment was one to remove a $25,000 cap on itemized deductions for mortgage interest, charitable deductions and property taxes paid. Removing the cap and allowing for the larger itemized deductions is estimated to reduce tax revenue by roughly $500 million – presumably over the next five years.

The two amendments that were defeated include one that would keep the top marginal personal income tax rate of 7.75% to kick in on income above $1 million; along with an amendment to end the state’s controversial film tax credit this year rather than the already-scheduled sunset date of 2014.

Overall, the House’s tax plan is projected to reduce the state’s tax burden by about $1.5 billion over the next five years compared to what the current tax code is projected to collect over that time.

Click here for a detailed summary of the House tax plan.

Click here for a chart detailing the fiscal impact of the House plan’s provisions, less the impact of the approved amendment.