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How do you like your taxes? Progressive or regressive?

One of the few points of consensus that the right and left can come to on North Carolina’s tax system is that it’s badly in need of fixing.

The particulars how to do that, and how much taxes different groups should pay, widely differs from that point on, and were the topic of a luncheon debate this afternoon on N.C. State University’s campus and hosted by the N.C. Institute of Emerging Issues, the conservative Civitas Institute and the N.C. Justice Center’s Budget and Tax Center.

Wonky terms like regressive, progressive taxes and supply-side tax policy were tossed around, in the context of a larger conversation about what slashing taxes can do to a community.

Does it spur growth, as those on the right argue? Or does it leave the poor and working-class paying more than their fair share while state services like public education and roads decline in quality?

You can see the debate yourself, by clicking here or checking out the embedded video below.

Among the more interesting parts of the conversation was talk about the Earned Income Tax Credit, which gives the poorest income earners a break on taxes and is set to sunset in North Carolina unless the legislature takes some type of action.

Elizabeth Malm of the conservative Tax Foundation’s Center for State Tax Policy said the EITC is a way to even the playing field that can occur when a state relies heavily on a state sales tax, which leaves the poor paying a larger portion of their income than the rich.

Malm also argued in the course of her talk that companies like to see lower corporate tax rates, and states need to keep that in mind if they want to see businesses come to their states.

“Companies can pick wherever they want to go in the world and we want them to come here,” she said.

Not so, said Jared Bernstein of the Center on Budget and Public Policy Priorities, the left-leaning group in the debate.

North Carolina’s is attractive because of its quality public education system, Bernstein said.

He also touched upon a state moving to depending more on sales taxes for revenue, while lowering income taxes. That creates a shift where the tax burden falls primarily on the poor and working class, leaving the wealthiest paying a smaller share than what they currently pay.

“It’s a shift at the top, the wealthiest, to the least able to meet those burdens,” he said.

The conversation certainly was timely, with state Senate leader Phil Berger unveiling an outline today of a plan that would deliver an estimated $1 billion cut in state services in exchange for broadening the state sales tax in included many currently untaxed services, dropping the state income tax from 7.75 percent for earners that make over $60,000 a year to 4.5 percent for everyone over three years and cutting the corporate income tax would drop from 6.9 percent to 6 percent.

The anticipated $1 billion the state would come up short in revenue is far from insignificant. To put that number in some perspective, the statewide community college system costs $1.4 billion a year to run 58 campuses (and ended up educating one out of every 9 adult North Carolinians in the 2010-11 school year).

2 Comments

  1. Doug

    May 7, 2013 at 3:50 pm

    Also, regressive in the tax view of it is not what we will be going to, the “rich” still will pay more taxes while the “needy” get their 0% tax rate. So your wonky headline makes no sense at all. A simpler tax system is much preferrable to the system we have now that picks winners and losers via a corrupt system of political cronyism and this etherial “fair share” thing that gets batted around like it is some scientific fact. The proposed system is actaully moving more toward your mecca of socialist europe where they are all about taxing via the value added tax. I am surprised it is met with so much venom here….I guess it is because the Republicans are getting something done that the democrat party never could (but has been talking about for a decade or so).

    re·gres·sive (r-grsv)
    adj.
    1. Tending to return or revert to a former state.
    2. Characterized by regression or a tendency to regress.
    3. Decreasing proportionately as the amount taxed increases: a regressive tax.
    4. Of or relating to geological regression

  2. david esmay

    May 7, 2013 at 4:28 pm

    Since ancient Greece the view that those who benefit most from society pay back commensurate with what they have gained. Only when we abandoned that principle with the rise of Reagan and neo-conservatism did our economy begin to falter.

    Re-pu-bli-can(idiot)
    1. Ability to believe in the unbelievable, i.e., austerity creates jobs, tax cuts for the wealthy and corporations creates jobs in spite of the fact all evidence points in the opposite direction.
    2. Destroying public education actually improves public education.
    3. Voter fraud actually exists.
    4. Of or relating to the delusion that conservatives are fiscally responsible moral arbiters for the majority of Americans.