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Ways and Means pauses debate on House Bill 4216, income tax reform
Summary
Representative Newton described HB4216’s three main provisions — moving the state tax base off federal taxable income, creating a flat rate, and phasing rate cuts — and the committee voted to adjourn debate pending further fiscal analysis.
The Ways and Means Committee paused debate Tuesday on House Bill 4216, an income tax reform measure that would untether the state income tax from the federal system, create a flat tax rate and phase cuts over time, after the bill sponsor said the panel needs more fiscal analysis before advancing the proposal.
Representative Newton, sponsor of H.4216, told the committee the bill has three central features: it would switch the state tax base from federal taxable income to adjusted gross income; it would collapse multiple brackets into a single flat rate (the bill initially set a flat rate of 3.99 percent); and it would phase a cut of the rate from 3.99 to 2.49 percent in $200 million increments over time. Newton said the change to adjusted gross income is intended to “untie” the state from the federal tax code and improve competitiveness in the Southeast.
The measure drew questions from members about alternatives and consequences. Representative Lowe asked whether a sales tax swap had been considered; Newton and other members said a penny of state sales tax raises in the ballpark of the hundreds of millions (one committee member cited about $800 million) and would not by itself replace the revenue impact of the proposed income tax cut, which Newton estimated as approximately $2.7 billion for the initial reduction. Representative Cobb Hunter pressed for consideration of an earned income tax credit and warned of the potential for unintended consequences from prior major tax changes, citing Act 388 as an example of a prior “tax shift” with long-term effects.
Newton said committee members had submitted amendment ideas and that staff — including Mr. Rainwater — would analyze fiscal impacts. For now, he moved to adjourn debate on the bill so members could review fiscal feedback before filing or voting on amendments. The committee approved the motion by voice vote; the chair declared the motion carried. No final vote on the bill was taken.
The committee’s action leaves H.4216 alive but paused for further staff analysis and potential amendment before it reaches the House floor.
