NC Budget and Tax Center

State leaders’ so-called tax reform can’t be trusted

State leaders continue to talk out of both sides of their mouths when it comes to their supposed tax reform efforts. In one breath, lawmakers scold the decision to temporarily increase the sales tax rate in the wake of the Great Recession, which caused revenue collections to plummet. In the very next breath, however, state leaders laud their desire to steadily increase the amount of sales taxes North Carolinians pay as a transformative, game-changing move.

How can they praise the very action they supposedly disavow?

This demonstrates why state leaders cannot be trusted regarding tax policy decisions they’ve pushed through in recent years and their stated plans going forward. Their rhetoric doesn’t align with their inconsistent actions.

State leaders have made it explicitly clear that they would like to make radical changes to North Carolina’s tax system. Their goal is to shift our tax system to rely more and more on sales taxes while working to eliminate the income tax. This tax swap does not bode well for most North Carolinians and jeopardizes the ability of our tax system to provide adequate resources to ensure that all communities can thrive.

Hardworking middle- and low-income North Carolinians are particularly harmed by this tax swap, as they pay a larger share of their income in sales taxes. So the more they are asked to pay in sales taxes, the less income they have to make ends meet. Income tax cuts largely benefit the wealthy and powerful corporations, so continuing to cut income taxes means giving more and more tax breaks to well-off households.

Since 2013, lawmakers have delivered nearly $15,000, on average, in tax cuts for millionaires, while hardworking middle-income North Carolinian have received just $6, on average, each year. Meanwhile, low-income North Carolinians who struggle the most to put food on the table and keep the lights on have received a $30 tax increase, on average.

The fact that this tax swap harms middle- and low-income families and individuals while greatly benefiting the wealthy and powerful has not stopped state leaders from ushering it in. In fact, it seems to embolden them to charge forward even faster.

The claim by state leaders that all North Carolinians have benefited from their tax swap efforts in recent years is more of their talking out of both sides of their mouths: Giving large tax cuts to the wealthy and powerful is a good thing. Raising taxes for lower income North Carolinians is good. And somehow all North Carolinians benefit. This flawed logic cannot be trusted.

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