NC Budget and Tax Center

Seeing the forest for the trees: Many won’t benefit from Joint Tax Deal

The Senate floor debate is likely to focus on the false claim that everyone will see more money in their pockets as a result of the joint tax deal released yesterday.  The Fiscal Research Division scenarios released yesterday provide examples of 24 taxpayers who would see an income tax cut under this deal. Importantly, 24 taxpayers experience can’t tell us what will happen to all taxpayers.

More recent analysis by Fiscal Research Division of other taxpayers released today provides a case in point.  These scenarios show that there are taxpayers who will see their income taxes increase as a result of this plan.

These taxpayers aren’t alone. The loss of deductions and exemptions and the fact that the benefits of the rate reduction disproportionately benefits the wealthiest taxpayers results in certain taxpayers losing just under the income tax changes. For example, if you send your children to child care and once were able to claim the child and dependent care credit, its loss in this plan could make your income tax bill increase. Or perhaps you own a small business; the $50,000 business income deduction is eliminated under the tax deal. Other ways that your income tax load goes up, loss of the Earned Income Tax Credit, no more medical expense deduction, loss of the personal exemption, loss of the standard deduction for seniors and the deduction for retirement income.

Of course, there is also the sales tax expansion.  This will impact low- and middle-income taxpayers both directly and indirectly as these taxpayers spend more of their annual income on taxable goods and services.  It is also true that businesses, no longer benefiting from sales tax exemptions, will pass on a portion of their increased sales tax to the consumer in the form of higher prices.

More robust analysis for estimating population-level impacts using an economic incidence model shows that when taking into account both the joint tax plan and the loss of the state EITC, taxpayers in the bottom 80 percent will experience a overall tax increase on average next year.

The current tax deal is not tax reform, and when considering that the EITC is also eliminated, it’s not even a tax cut for many families. This most recent rendition of the NCGA tax negotiation is indeed a deal, a sweet one for the wealthy and profitable corporations. Unfortunately it’s a bad deal for most of us.

6 Comments

  1. love my state

    July 16, 2013 at 3:45 pm

    correction, most won’t benefit…

  2. Love my state too

    July 16, 2013 at 6:55 pm

    Don’t forget to mention that most will benefit….in the long run…from having NC increase competitiveness in economic growth. Increased jobs etc, I am sure many of the unemployed would be glad to pay their share of $3-15 per month to have a better shot at jobs.

  3. Carolyn Haywood

    July 17, 2013 at 10:20 am

    @ love my state, too – so you think jobs are going to come to a state with substandard schools, uneducated workers, backward policies, crony politics, etc? NC is already a national laughing stock and it looks like it will continue to be.

  4. ConcernedNCMom

    July 17, 2013 at 8:51 pm

    Ditto Carolyn.Duh @love my state too, the unemployed don’t have $3-15 to pay because that’s all they have left to eat with for the month.You took the rest,remember? Wise up because any legit business will be passing us by in favor of Mississippi.

  5. Paul Miranda

    July 19, 2013 at 10:10 am

    Those with poverty level income and no mortgage will benefit, and those making over $100k/yr will benefit. For those of us in between, we will pay more. The more children we have, the more we will lose. With the loss of the personal exemptions, it should be called the new NC Family-Tax Bill.

  6. Doug

    July 20, 2013 at 2:19 pm

    Concerned mom…yes they do. Just skip the McD’s they can go to since they get all the government perks!