Senate Bill 658 - 21st Century Tax Modernization Plan

• Individual Income Tax Reform: Adopts federal adjusted gross income as starting point, converts itemized deductions to tax credits, indexes tax brackets for inflation, and establishes five new tax brackets with rates ranging from 0.0% to 7.5% (effective for taxable years beginning January 1, 2012).

• Sales and Use Tax Expansion: Reduces state general sales tax rate from 4.75% to 4% (October 1, 2013) and then to 3.5% (October 1, 2014), while expanding the tax base to include services, entertainment admissions, digital property, and tangible personal property services.

• Corporate Income Tax Phase-Out: Gradually eliminates corporate income tax by reducing the rate 1% per year starting in 2013 (4%), 2014 (3%), 2015 (2%), and 2016 (1%).

• Business Privilege Tax: Replaces franchise tax with a new business privilege tax imposed on all limited liability entities at $1.50 per $1,000 of the higher of adjusted net worth or investment tax base (minimum $200, maximum $75,000).

• Elimination of State and Local Privilege License Taxes: Repeals archaic state privilege license taxes and prohibits counties and cities from imposing new privilege license taxes on businesses, with local governments receiving increased revenues from expanded sales tax base.