The revised revenue forecast released today demonstrates how important the income tax is to our state’s ability to make investments that boost our economy. As legislators begin building the next state budget, they should protect the income tax, not scale it back or eliminate it as some have proposed.
The revenue forecast indicates that tax collections since the beginning of 2013 are on target to pay for critical services included in the Fiscal Year 2012-13 budget, thanks to the revenue generated by the personal income tax. The personal income tax has been the most consistent source of revenue to pay for education, transportation, and public safety in North Carolina, and recovered quickly after the Great Recession, according to the report released today by the non-partisan Fiscal Research Division.
Sales taxes have not rebounded nearly as well because consumer demand continues to be weighed down by economic concerns, including the state’s high unemployment rate.
Revenue predictions also remain tenuous because of legislators’ decision to give businesses a $50,000 tax cut. This tax break for large, profitable businesses and wealthy individuals will cost the state an estimated $460 million, far more than was originally estimated. The tax cut could cost even more in future years as more businesses take advantage of it.