News-Record.com

Sen. Dan Clodfelter and the Senate Finance committee rolled out their much anticipated proposal to rewrite the state's tax system.

You can click here for a 45-minute audio file that contains Clodfelter's explanation of the bill.

During the hearing, three different documents were handed out, presented here as handy PDFs:

• * Document 1 is an overview of the proposed changes.

• * Document 2 outlines in more detail changes made to personal and business income taxes and sales taxes.

• * And if you stare at it long enough, Document 3 supposedly shows the impact of the various tax changes on different kinds of tax payers and state collections.

Clodfelter took pains to say that the proposal would not be voted this week and may not see a vote next week. And, he said, the committee was open to reviewing changes. However, he warned, if someone wanted to pare down the revenue coming from a particular tax, they would be asked to make up the difference somewhere else.

I'm still trying wrap my brain around all this, but here are some highlights gleaned from today's presentation:

• * Income and sales taxes are lowered, but there are trade offs in each case. For sales taxes, the trade off is that more things - including services - would be taxed. For both personal and business incomes, the trade off comes in the form of fewer deductions and weird little loopholes.

• * State income tax would be based on federal adjusted income. This should, Clodfelter said, make filing state income taxes easier. Also, the plan would create a new bracket for the first $10,000 of income a couple earns. Instead of getting a credit, those very low income families would not be taxed at all, Clodfelter said.

• * Sales tax would be reduced to 6 percent.

• * You'll be paying sales tax on software on the software you download over the internet, as well as warranties and repairs for tangible personal property.

• * Heavy equipment, such as mill machinery, would be exempt from sales tax but things like grease and parts used to maintain those machines would be subject to sales tax. That's a change from the current system that taxes all such items at 1 percent but caps the maximum amount payable at $80.

• * Cities and counties would lose their sales tax exemptions. School boards have been battling for years to get the same exemption that other local governments have. Now, all local governments would be in the same boat.

• * Cigarette taxes would be increased 15-cents-per-pack to 50-cents. The tax on other tobacco products would rise 3 percent.

• * Alcohol excise taxes would rise. The amount collected would be similar to the amounts outlined in governor Bev Perdue's budget, but collected as an excise tax rather than the extra sales tax that Perdue had proposed. Taxes on particular alcoholic products would rise based on the amount of alcohol by volume they contained.

There’s more to it than that. If you have a question or a highlight (lowlight?) you want to point out, the comments link is open.