NC Budget and Tax Center

North Carolina’s tax code isn’t meeting the state’s needs, will continue to fall short

Leaders in the General Assembly responded to the consensus revenue forecast with a promise to continue with the tax cuts that have hampered our states ability to fund classrooms, support rural economic development and strengthen the economy for the long-term.

The tax cuts that are scheduled for January 2019 will reduce annual revenue by $900 million in a full fiscal year.  But because the new tax cuts start in the second half of the second year of the two-year budget, lawmakers were not required to account for roughly $400 million of the annual cost of the tax cuts. Leaders put together a state budget for the second year that only accounts for $521 million in revenue losses from cutting the rate of taxes paid by corporations on their profits to 2.5 percent and further lowering the state’s flat personal income tax rate to 5.25 percent.

Leaders claim that the announcement of an over-collection—a mere 1 .5 percent—of the state budget merits staying the course.  Even with that announcement of dollars above what was expected, however, North Carolina will not have a tax code that keeps up with meeting the needs of a growing population with diverse needs.

Residents across the state, along with experts in their fields, point to the myriad unmet needs that have resulted from prioritizing tax cuts over public investments:

  1. Too few counselors to support children’s educational success.
  2. Too few monitors of the state’s air and water quality to protect from chemical dumping like GenX.
  3. Too few services for home-bound seniors living in community.
  4. Too many crumbling roads bridges, and school buildings.

The reality is that the announcement that revenue is coming in ahead of projections does not mean North Carolina has what it needs to build thriving communities.

It does not capture the losses that have been sustained year after year because tax cuts have been prioritized over people and communities.

Relying on over-collections to meet needs isn’t a fiscally responsible or sustainable course for our state.

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