2018 Fiscal Year State Budget, NC Budget and Tax Center

Changes to child tax credit in Senate budget hurt middle class taxpayers

The Senate’s budget includes costly tax cuts that proponents claim are targeted towards middle class taxpayers. The tax cuts will cost $324 million for the upcoming fiscal year and will balloon to more than $800 million within five years. Rather than targeting middle class taxpayers, the proposed tax cuts largely benefit the highest income earners in the state and profitable corporations.

The proposed change to the existing Child Tax Credit included in the Senate’s budget makes this reality clear. Eligible taxpayers with dependent children currently get a tax credit of either $100 or $125, depending on the taxpayer’s income level. The Senate’s budget replaces this tax credit with a deduction, which allows the eligible taxpayer to deduct a portion of their taxable income. Under this tax change, middle income taxpayers will fare worse compared to the Child Tax Credit under current law.

Here are examples that highlight how taxpayers fare worse under the proposed tax change based on income levels and tax filing status:

  • Under the existing tax code, single filing taxpayers with adjusted gross income between $30,000 and $40,000 get a $100 tax credit for each child. Under the Senate’s budget, the proposed deduction equates to an $80.25 tax benefit for these taxpayers (under a reduced income tax rate of 5.35% included in the Senate budget).
  • Under the existing tax code, taxpayers filing as Head of Household with an adjusted gross income between $50,000 and $60,000 get a $100 tax credit for each child. Under the Senate’s budget, the proposed deduction equates to an $80.25 tax benefit for these taxpayers (under a reduced income tax rate of 5.35% included in the Senate budget).
  • Under the existing tax code, married taxpayers filing jointly with an adjusted gross income between $60,000 and $80,000 get a $100 tax credit for each child. Under the Senate’s budget, the proposed deduction equates to an $80.25 tax benefit for these taxpayers (under a reduced income tax rate of 5.35% included in the Senate budget).

The examples highlight that this proposed tax change in the Senate budget makes middle class taxpayers with children worse off, not better. As the saying goes, the devil is in the detail.

 

For more news and analysis during the budget debate, follow the Budget & Tax Center on Twitter @ncbudgetandtax.

 

Check Also

New budget a roadmap full of potholes and an unclear destination

A new BTC report highlights how the new ...

Top Stories from NCPW

  • News
  • Commentary

When the N.C. Senate elected Tom Fetzer to the UNC Board of Governors in March, it was widely seen a [...]

The 12 minutes spent on the phone with Duke Energy customer service shed no light on how — or if — c [...]

Crumbling ceilings. Failing air conditioning and heating systems. Broken down school buses. Mold inf [...]

This story has been updated with comments from Jim Womack, who did not respond earlier to questions. [...]

Last week, the General Assembly announced which legislators will serve on the Joint Legislative Task [...]

The latest effort in Washington to repeal and not actually replace the Affordable Care Act has a dif [...]

Conservative group “reviewing” bigoted attacks; funding from major NC corporations implicated Nearly [...]

5---number of days since Senators Bill Cassidy and Lindsey Graham unveiled a new proposal to repeal [...]

Featured | Special Projects

NC Budget 2017
The maze of the NC Budget is complex. Follow the stories to follow the money.
Read more


NC Redistricting 2017
New map, new districts, new lawmakers. Here’s what you need to know about gerrymandering in NC.
Read more