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Doubling the Standard Deduction is insufficient to protect low- and moderate income families

Posted By Cedric Johnson On June 18, 2013 @ 4:12 pm In NC Budget and Tax Center | Comments Disabled

Low-income families actually fare worse under House and Senate tax plans

Proponents of the House plan claim that doubling the standard deduction and child tax credit provide a generous benefit to low- and middle-income taxpayers in North Carolina. However, what proponents fail to acknowledge is that, at the same time, they are eliminating the personal exemption allowance and allowing the state Earned Income Tax Credit to expire, which effectively makes our current tax law a better bet for these taxpayers.

Proponents support this claim by highlighting that doubling the standard deduction would make the state have the most generous treatment of the first dollar of income in the country. This claim is simply false. When comparing the House tax plan to current tax law – which includes a standard deduction, personal exemption, child tax credit and a state Earned Income Tax Credit – low-income taxpayers will see their first dollar of income taxed sooner [1]. As a result, North Carolina would indeed climb in ranks among states; however, not for its generosity, but rather it requiring low- and middle- income taxpayers to pay more income taxes.

Doubling the standard deduction allowance and child tax credit while eliminating the personal exemption allowance and allowing the state EITC to expire does not protect low- and middle-income families in North Carolina, as proponents of the House tax plan contend. These provisions in the House plan are also not sufficient to address the state’s upside-down tax system overall because they are not able to address the total taxes paid, including an expanded sales tax, by low- and middle income taxpayers.

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URL to article: http://pulse.ncpolicywatch.org/2013/06/18/doubling-the-standard-deduction-is-insufficient-to-protect-low-and-moderate-income-families/

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[1] first dollar of income taxed sooner: http://www.ncjustice.org/sites/default/files/PIT%20Income%20Threshold_Senate%20and%20House.pdf

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