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The truth about the tax plan hasn’t changed: Most families will pay more

Posted By Cedric Johnson On January 16, 2014 @ 5:20 pm In NC Budget and Tax Center | Comments Disabled

If you dressed a wolf in sheep’s clothing, would you then believe it was a sheep?

The leadership in the General Assembly and its allies hope you will. Proponents of the state’s new tax law are trying desperately to justify it, most recently by citing pennies in tax cuts for low- and middle-income North Carolina families in 2011, hoping you’ll ignore the harm the recently passed package will cause.

Most of the 2013 tax plan goes into effect this year, and for the vast majority of North Carolinians the picture is bleak.

The Budget and Tax Center’s analysis of the plan [1] shows that when you consider all the tax changes and compare them to previous tax law, on average, people making under $84,000 a year – the bottom 80% of North Carolina taxpayers will see their taxes go up.

In a new analysis, proponents of the plan are touting the 2011 expiration of a temporary sales tax increase as evidence that low- and middle-income earners are better off.  They fail to note that lawmakers allowed a surcharge on high-income earners to expire (a tax cut of around $200 million [2]) in 2011 too.  The expiration of the surcharge will actually generate an even greater tax cut for high-income taxpayers.

There are other key facts that get soft-pedaled in the Locke Foundation’s analysis [3]. Specifically:

  • Allowing the temporary sales tax increase to expire did not get us any closer to fixing the real problems with our upside-down tax code. It continues to ask lower-income families to pay a larger share of their income in sales taxes than wealthy taxpayers, even when you take account of the lower sales tax. The expansion of the sales tax to some other goods and services under the latest tax plan only makes those problems worse.
  • It is unclear whether proponents of the tax plan included the expiration of the state Earned Income Tax Credit (EITC) in their analysis. This change alone will increase taxes for more than 900,000 North Carolinians who are struggling to keep their heads above water in low-wage jobs. For a family of two with two children, the loss of the tax credit will mean fewer dollars for groceries, utility bills and gas in the car.

The Locke Foundation states clearly that there will be winners and losers under this tax plan. On that we can agree.

We can also agree with another one of its findings: that the majority of the benefit goes to a small share of taxpayers.  Nearly two-thirds of the tax cut, by the Foundation’s own calculation, goes to those earning over $100,000 a year, the top 11 percent of taxpayers in North Carolina.

There is no doubt that the tax plan is anything but fair in how it treats low- and middle-income North Carolinians.

Proponents can only ignore this reality for so much longer.


Article printed from The Progressive Pulse: http://pulse.ncpolicywatch.org

URL to article: http://pulse.ncpolicywatch.org/2014/01/16/the-truth-about-the-tax-plan-hasnt-changed-most-families-will-pay-more/

URLs in this post:

[1] analysis of the plan: http://www.ncjustice.org/?q=budget-and-tax/btc-reports-final-tax-plan-falls-far-short-true-tax-reform

[2] a tax cut of around $200 million: http://www.ncjustice.org/sites/default/files/BTC%20Brief%20-%20Corporate%20Surcharges.pdf

[3] Locke Foundation’s analysis: http://www.johnlocke.org/acrobat/spotlights/Spotlight449TaxDistribution.pdf

[4] Who pays taxes in North Carolina? : http://pulse.ncpolicywatch.org/2014/04/14/who-pays-taxes-in-north-carolina-2/

[5] Report documents Great Tax Shift; new NC code produces worst-of-all-worlds results : http://pulse.ncpolicywatch.org/2014/04/14/report-documents-great-tax-shift-new-nc-code-produces-worst-of-all-worlds-results/

[6] What’s going on in Kansas? Beware North Carolina! : http://pulse.ncpolicywatch.org/2014/03/28/whats-going-on-in-kansas-beware-north-carolina/

[7] The tax plan costs more : http://pulse.ncpolicywatch.org/2014/05/05/the-tax-plan-costs-more/

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