NC Budget and Tax Center

Newest Senate Tax Plan shifts tax load to low- and middle-income families

The newest (5th version) of the Senate tax plan is said to be a modified version that addresses various concerns in early versions of the plan. Nevertheless, the bill maintains its core elements – huge tax cuts for the wealthy and profitable corporations and significant revenue loss – and returns to expanding the sales tax to more goods and services (though not as comprehensive as one of the earliest versions) in an effort to reduce the revenue loss slightly from the prior $1.3 billion to now nearly $1 billion.

The repeated claim made by Senator Berger and proponents that all taxpayers would see an income tax cut under the modified tax plan is simply not true. Cutting the personal income tax rate may appear to benefit all taxpayers but it doesn’t and the tax plan has many other moving parts that will shift the tax load to low- and middle-income taxpayers. For example, by eliminating the personal exemption allowance, the state EITC, and the additional standard deduction allowance for seniors, many taxpayers fare worse under the newest Senate plan compared to current tax laws.

Below are examples of particular taxpayer profiles in which the taxpayer would pay more in income taxes under the newest Senate plan. And because the plan taxes more goods and services, low- and middle-income taxpayers would pay even more in taxes – both directly and indirectly – because they spend more of their annual income on goods and services subject to sales and excise taxes.

**NOTE: The tax rate cut does not benefit all taxpayers. Many low-income folks pay $0 now and would pay $0 under the new plan. If the plan had a state EITC, these taxpayers would get a refund.

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The newest Senate tax plan follows the same approach of increasing the tax load to low- and middle-income taxpayers – particularly those with children – while North Carolina’s richest taxpayers would get a huge tax cut. A better way to look at the population level impact of this plan is to use an economic incidence model.  This method tells us that the Senate tax plan fails to address the state’s upside-down tax system and instead tilts it even more to favor wealthy individuals and profitable corporations, in which 56 percent of the net tax cut would go to the richest 1 percent of taxpayers.

This scenario is unacceptable for North Carolina.

5 Comments

  1. Doug

    July 9, 2013 at 5:37 pm

    So that $12 to $15 is earth shattering how? I congratulate you on having the guts to publish what little effect this has on the general population. This is a lot of hysteria on the part of progressives for such a little change….hardly even worth the time it took for Cedric to write the post.

    As RJ said, just skip McD’s a time or so a month and you are good….and you get to do the progressive thing and contribute to the government that is so needed. (Plus we may cut down on the obesity rate a bit).

  2. RJ

    July 9, 2013 at 8:08 pm

    Doug: My point, of course, to any sentient reader, was that you would pay $15 more a month while a rich, self-employed individual would save some $700 a month. You are not sentient so I guess it went over your head.

  3. Doug

    July 9, 2013 at 9:06 pm

    So why begrudge one over the other? Why is it such a bad thing? Heck, when all those people saving the $700 go out and buy say the big screen TV, some home improvement item, or whatever…then it stimulates the economy. When the person pays the $15 more and it goes back to them with the continued government perks…that too in the progressive view is benefiting the economy. When this thing passes….it is a win win for sure.

  4. Susan Moses

    July 10, 2013 at 8:38 am

    It’s not a “win win for sure” if that $15 is part of a paycheck that has no breathing room and in most cases this money will literally be taken “out of the mouths of babes.” This new plan borders on the immoral and to compare buying necessities and food with buying a big screen TV speaks volumes about the skewed perspectives and priorities of those who are happy as pigs in slop about this plan.

  5. Doug

    July 10, 2013 at 10:22 am

    Sue-sue,
    You are being a bit overly dramatic, there are plenty of government perks out there to keep the “starving babies” from being in that sitution. Why did you know we extend food stamps to those people…to the tune of more people get them than actually are working in this nation? There are few poeple in this nation “starving” than in any other nation on earth. And both of those facts are almost unprecedented by the way.

    Also, maybe you need to have your clergy to start working and promoting a food bank….that could do a lot more good than hootin’ and hollerin’ on the next Money Monday. Or maybe you could start donating to the food banks rather than doing your own hootin’…I take food to my local food bank, how about you libs step up rather than whining all the time. Personal responsibility should not be related to the government or taxes. I know, how about you get Barber out there soliciting bringing food to his Monday hootfest….not for him to eat, but to take to local banks…..at least that would do good rather than harm to NC.