A 50-state analysis of the House tax plan released last week reveals that in North Carolina the wealthiest 1 percent of North Carolinians will receive the greatest share of the total tax cut in year one and their share would grow through 2027. Further, the value of the tax cut would decline over time for every income group in North Carolina except the very richest.
House leadership continues to tout this tax proposal, which will increase the federal deficit by $1.5 trillion over the next decade, as a plan to boost the middle class. But a closer examination of the bill’s provisions reveals that it is laser-focused on tax cuts for the nation’s highest earning households. The wealthiest North Carolinians share of NC’s tax cuts would grow over time due to phase-ins of tax cuts that mostly benefit the rich and the eventual elimination or erosion in value of provisions that benefit low- and middle-income taxpayers. For example, after five years, the bill eliminates a $300 non-child dependent credit that benefits low- and middle-income families while fully repealing the estate tax in year six for the very large estate subject to the tax.
More specifically, the 10-year outlook for the plan reveals that by 2027, the top 1 percent of households in North Carolina share of tax cut would increase from 30 percent in year one to 43 percent by 2027, for an average cut of $55,030 in 2027. Middle-income taxpayers’ average tax cut would erode to $660 from $770, and the poorest 20 percent’s average tax cut would decline from $220 to $120.
The bottom line: This tax bill will hurt North Carolina taxpayers in the short- and long-term by primarily benefiting the wealthiest in the state and undermining public investments that serve us all today and in the future.
Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.