NC Budget and Tax Center

Replacing lost revenue in House tax plan

After the House Finance committee increased the cost of the House tax plan to around $864 million, the House Appropriations committee decided today not to debate it. This decision highlights the trouble the state will have paying for the huge revenue loss caused by this bill. By cutting income tax rates and expanding the sales tax base to include more goods and services, this approach would shift the tax load to low- and middle-income taxpayers, cut taxes for wealthy individuals, and hurt the state’s ability to make vital investments in the state’s economy and quality of life.

There are some things lawmakers could do to lower the cost of the House bill, including:

  • Reducing the personal income tax cut and maintaining the current progressive rate structure which asks wealthy people to pay a higher share of their income than low-income people. The House tax plan replaces the current progressive income tax structure with a flat 5.9 percent income tax rate, costing $1.6 billion. Maintaining a progressive income tax results in a fairer tax system and will provide additional revenue.
  • Closing corporate income tax loopholes. The House tax plan does little to reduce tax loopholes, which cost the state around $2 billion each year, according to the NC Department of Revenue. Closing loopholes would simplify the state’s tax code and raise additional revenue.
  • Collecting sales tax on more goods and services. The House tax plan expands the sales tax to a limited number of services not currently taxed, but it could include even more goods and services. However, this option would hurt low- and middle-income taxpayers, who already pay a larger share of their income in state and local taxes compared to higher income taxpayers and therefore would require a stronger state Earned Income Tax Credit.

As the proposed House tax plan continues to make its way through the legislative process, lawmakers will make choices that will impact the lives of all North Carolinians. The House tax plan in its current form is the wrong choice for the state.

2 Comments


  1. JeffS

    June 5, 2013 at 3:19 pm

    They did exactly what they intended to do. Why would they want to change it now?

    They are looking out for themselves and their financial supporters. To a conservative, doing anything else is illogical.

  2. Doug

    June 5, 2013 at 4:39 pm

    Exactly, why would they replace something that is not needed? The state will be better off in the next recession if we go ahead and set it up for those times by decreasing the size of the government. The less they confiscate the better.

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