The tax plan signed into law by Gov. McCrory earlier this year has been lauded by proponents as a major accomplishment during the 2013 legislative session. The tax plan, which cuts the state’s corporate and personal income tax rates, makes changes to the sales tax, and includes other tax law changes, reduces revenue for public schools and other public investments by more than $500 million over the next two years. By 2018, the tax plan reduces annual revenue by more than $650 million.
By chalking the tax plan up as a win for all North Carolinians, proponents fail to acknowledge the reality of fewer dollars for public investments and that the plan produces winners and losers. The tax plan does not represent a path toward shared prosperity for all North Carolinians, as BTC’s highlights in its analysis of the tax plan. Under the tax plan, taxpayers earning less than $84,000 a year, on average, will see their taxes increase and more than 65 percent of the net tax cut will flow to the top 1 percent of income earners in the state.
Here are examples of taxpayers in North Carolina who are likely to see their total tax bill go up as a result of this plan.
- Married, non-elderly couple with two kids earning $21,000 per year will see their state and local taxes increase by about $265 under the tax plan.
- Married, elderly couple with $35,000 in income (which includes $6,000 in public pension benefits) will see their state and local taxes increase by about $187 under the tax plan.
- Single, small business owner with $70,000 in income (and qualifies for the full $50,000 business income deduction, which is eliminated under the tax plan) will see his state and local taxes increase by around $2,700 under the tax plan.
The claim by proponents that cutting taxes will boost economic growth in North Carolina follows the failed trickle-down economics theory – which assumes that cutting taxes for the already wealthy and profitable corporations will somehow produce shared economic prosperity for all North Carolinians. However, the growing income inequality in the United States highlights the recklessness of this flawed theory, as does the overwhelming evidence from academic research and evidence from other states’ experience.
The tax plan is not a winner for everyone nor does it garner the overwhelming support from voters that proponents claim. When asked if they prefer tax cuts that reduce available dollars for public schools, more than 2 out of 3 North Carolinians oppose such a plan.