NC Budget and Tax Center

Telling the FULL story on tax proposals

Here’s the full story on the House tax plan: It will increase taxes for middle- and low-income households while giving a large tax cut to the wealthy. The bottom ninety-five percent of taxpayers would see their taxes go up, on average, under the bill version that will be heard in House Appropriations today.

Those who focus only on the income tax changes and say this is a tax cut for everyone are ignoring how the sales tax changes – a major part of this tax plan – will hurt average families. Those who are using data from the Fiscal Research division to extrapolate that the majority will see a tax cut are also mistaken. These claims only obscure the harmful impact of this tax plan on the majority of North Carolinians.

The House tax plan does provide an income tax cut to taxpayers across the income spectrum, but that’s not the whole story and still 27% of all taxpayers would see an income tax increase. The greatest cut goes to the top: More than third of the income tax cut goes to the richest 1 percent. But as all North Carolinians know, we don’t just pay income taxes; we also pay sales tax. That’s why we must look at income and sales tax changes in order to evaluate whether the House tax plans are good for our state.

The House tax plan expands the services that are subject to the sales tax. Because they spend a greater share of their income on taxable goods and services to meet their basic needs, middle- and low-income families will pay more of their income in sales taxes than the wealthy. In the House plan, the expansion of the sales tax is, on average, enough to cancel out the income tax cut, on average, for the bottom 95 percent of taxpayers.

Sample taxpayer analysis is a helpful way to understand some of the impacts of the tax plans, but we can’t assume the experience of all taxpayers in the same income group will be similar. The experience of a representative taxpayer should not be extrapolated to the entire population. As we are explaining in a blog series this week, there are many taxpayers who won’t experience a tax cut in the same way as the Fiscal Research division’s analysis shows.

The distributional analysis of tax plans is a more accurate way to look at the real impact. This type of analysis is critical to having an informed debate about the impact of tax changes. It looks at final incidence – basically who actually ends up paying the tax, not just who is initially responsible, as well as whether any of the tax is exported.  A distributional analysis also examines the impact on a range of taxpayers and filing types so we better know the likely experience of taxpayers overall.

There is no getting around the fact that the House plan, as well as the Senate ones, are tax shifts that place a greater burden on middle- and low-income people, while the wealthy get a big tax break.


  1. Lisa Pavlecich

    June 6, 2013 at 3:38 pm

    More regressive tax plans from the Republican party. When will it all end…When we vote them out of office,that’s when.

  2. casey

    June 6, 2013 at 4:00 pm

    Take a look at their website: and try plugging in a few numbers. Their own website shows it is a regressive tax system which benefits the wealthy.

    For example, a family of four (with two dependents) who earns $100k a year will get a whole $264 back (a 0.264% tax cut). Whereas that same family but with an income of $200k would get $4201 back (a 2.1005% tax cut). That same family would get $297 back if they only made $50k a year (a 0.594% tax cut) – better than the $100k cut but nowhere near the $200k cut. (That is with their automatic deduction/expense calculator enabled.)

    To summarize: a family (of four) earning $50k gets a 0.59% tax cut, a family earning $100k gets a 0.26% tax cut, and a family earning $200k gets a 2.1% tax cut.

    Other numbers are more striking, but I went with those since they are so well rounded and not too far from common income levels. We need to make sure everyone realizes this tax cut disproportionately benefits the wealthy instead of letting the GOP swindle everyone out of their money with misleading promises of “tax cuts for everyone.”

    Keep up the good work!

  3. art

    June 6, 2013 at 4:25 pm

    I don’t know what to say besides these taxes are just wrong.For the well to do,how much money is enough.I can see trying to stimulate the economy,but like I have a work injury and have a terminal illness.I am on approx.1,800/mo. prescriptions.My social security,which I pd. out of my income for 37 yrs. before becoming disabled,is 1,232/mo..Mr. McCrory I know you are good with math,so fill in the blanks,and if you proceed with the taxes,I do hope the costs of them fall close to your house also,I cannot afford any new taxes/payments of any type.Please think this over…..

  4. casey

    June 7, 2013 at 3:56 am

    (That data was using Berger’s website, by the way. Who knows if it is anywhere near accurate.)

  5. Jim

    June 7, 2013 at 9:33 am

    The article is misleading.
    Although the sales tax broadening will make everyone pay more sales tax, the higher income people buy more stuff and services so they will pay more sales tax dollars. You have to look at the dollar amount, not just the portion of their income. A better job will benefit a low wage earner more than continued welfare and special tax treatment.

    Promoting the economy will give everyone a chance to better themselves with higher wages, more job opportunities, better neighborhoods (more people have jobs), etc. The income tax decrease might be less than the sales tax increase for some people. But those people are not paying much income tax and are supported by those that are paying high income taxes.

  6. Jim

    June 7, 2013 at 9:47 am

    Using the house plan this is what a $50,000/yr worker pays for income tax using the standard deduction:

    Married family of 4: 2012 $3,527, 2014 $2,242
    Single with no kids: 2012 $4,892, 2014 $2,596

    See how over taxed the single worker is taxed in the current system?
    The proposed change is closer to being fair, but the person that CHOSE to be married and have kids is still paying less.
    I think if you earn it, you should pay your fair share. No special deductions, loop holes, etc.

  7. Jim

    June 7, 2013 at 10:05 am

    Correction to earlier post:
    Married family of 4: 2012 $2,252, 2014 $2,242
    Single with no kids: 2012 $2,987, 2014 $2,596

  8. barbara

    June 11, 2013 at 3:24 pm

    This will damage economic recovery.
    Republicans have already done enough damage.

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