NC Budget and Tax Center

Income tax cuts cost more than originally projected according to Fiscal Research Division

Income tax cut costs will rise to more than $1 billion by 2016, raising serious concerns about whether the current budget negotiations are putting forward a fiscally responsible path to meet the priorities of our state. Before the budget is finalized, legislative leadership must consider this newly available information that the tax cuts will cost more than originally estimated and move immediately to stop further revenue losses in 2015.

Fiscal Research Division revised estimates this week based on new data just released from the Internal Revenue Service on the incomes and taxes paid by North Carolinians through the personal income tax in 2012.

The higher cost of the tax plan is likely the result of the greater benefit that the tax plan has for high wealth taxpayers who have seen their incomes recover more quickly out of the Great Recession. Prior estimates by Fiscal Research Division were based on IRS data from earlier years thus not accounting for this income growth and the latest available information on the costs of deductions and credits.  It is clear not only that the rate reductions are having a larger than anticipated effect but also that we should not expect that base-broadening impacts will be sufficient to hold those revenue losses in check.

The fundamental issue is that the income tax cuts cost more than originally projected and require policymakers to take immediate steps towards stopping further revenue losses with rate reductions automatically scheduled to go into effect in 2015.

4 Comments

  1. Alex

    July 27, 2014 at 7:52 am

    Tax cuts are not an expense since all of this money goes back to the working citizens of North Carolina. Spending money on wasteful programs is an expense.

  2. Pertains!

    July 27, 2014 at 10:53 am

    Yes money spent on big boats is identical to money spent on food staples. I doubt any of the upper income group that these tax cuts benefit puts any in the stock market (got to support Wall Street) or on vacations in other countries.
    I guess you think Medicaid for the blind, disabled and all the families trying to exist on minimum wage is just wasted money.

  3. Jim Wiseman

    July 28, 2014 at 7:59 pm

    Only a marxist would claim that tax cuts “cost” anything.

  4. Jack

    August 1, 2014 at 11:17 pm

    Us marxists realize that not having enought money to pay teachers or pave our roads are a social cost. if you had a business and had an unexpected expense, wouldn’t you consider that a cost?