Home > Uncategorized > The state Senate’s latest gift to the rich

The state Senate’s latest gift to the rich

Post on June 4, 2008 by 5 Comments »

The state Senate is up to its old fiscal policy tricks again. Last year, Senate leaders forced through a large tax cut for upper income households and had to be dragged kicking and screaming to agree to a microscopic earned income tax credit for low income people. This year, the House hasn't even completed work on the budget and Senate leaders are already firing new and regressive shots across the bow.

A case in point was yesterday's 46-0 vote to repeal the state gift tax. While it's true that North Carolina is one of only a handful of state's to maintain such a tax on the books, the timing of the proposed $18 million cut (at a point in which the state budget margin is razor thin and such critical areas as MH/DD/SA and probation services are horrendously underfunded) is hard to fathom. Of all times to be cutting taxes on the rich!!

Another hidden aspect of the cut is its likely impact on the current estate tax. With the demise of the gift tax, the wealthy will have more incentive than ever before to frontload their giving so as to avoid the estate tax when they die. This almost certainly means an even greater revenue reduction than is immediately evident in the gift tax cut itself. All in all: a regressive, shortsighted and all around terrible move at a terrible time.

The N.C. Budget and Tax Center plans to release some additional analysis on the Senate's action later today. Let's hope the House reviews it carefully. Be sure to check back at NC Policy Watch and The Progressive Pulse for more details.

Possibly related posts:

  1. Freyer: “Right-sizing” government downsizes economy across all regions in the state (video)
  2. Economic incentives hit a new low
  3. Rep. Bill Owens “surprised” state budget he voted for meant teaching cuts in his district

This entry was posted in Uncategorized. Bookmark the permalink.

Comments (Closed):5

  1. Rob Schofield
    June 4, 2008 at 11:27 am

    P.S. It’s especially disappointing that not a single progressive senator even raised a peep about this. I mean the thing was pushed through quickly — before advocates even had much of a chance to raise red flags — but good grief, aren’t some things easy enough to understand on one’s own??

  2. Paul
    June 4, 2008 at 1:33 pm

    God forbid that this state takes a step toward ending double taxation.

  3. Elaine Mejia
    June 4, 2008 at 1:54 pm

    Ok, that last comment is ridiculous. An estate isn’t even taxable under current law until its value exceeds $2 million and even then it’s only taxed on its value above $2 million. So the first $2 million isn’t never taxed. This is not a case of stopping double taxation – it’s a case of massive accumulations of wealth that are never taxed much less double-taxed.

  4. Paul
    June 4, 2008 at 2:29 pm

    @Elaine Mejia:

    A gift tax is a tax on money that has already been taxed (NC already has an income tax). Therefore, a gift tax amounts to double taxation.

    If someone gives away merchandise the gift tax amounts to triple taxation – income tax (in order to but the items in the first place), sales tax, and gift tax.

    And to say that “massive accumulations of wealth” are never taxed is ludicrous. Income tax was paid on the wealth when it was earned. The real estate that is purchased with this wealth is certainly taxed. The merchandise purchased with this wealth is certainly taxed.

  5. Elaine Mejia
    June 4, 2008 at 4:41 pm

    Wealth can be accumulated without being taxed and it’s happening every day by the billions. It’s called “unrealized capital gains.”