NC Budget and Tax Center

Limits on income tax will put immediate pressure on policymakers to raise other taxes

The income tax cap being considered by the House this week would put public investments at risk and is likely to force policymakers to raise other taxes to meet growing needs in the near term.

Last summer, the Fiscal Research Division provided a 5-year forecast of the state’s fiscal position that took into account the state’s growing population and the cost of delivering just current service levels to more people over time.  Their findings were, that in Fiscal Year 2019-2020, North Carolina policymakers would not have the revenue to deliver the same diminished services to future populations. Even under revisions to revenue collections next year, this finding holds.

The state’s current tax code, resulting from the tax cuts since 2013, and  growth still slow relative to historic performance is primarily to blame.  An income tax cap now would lock in the $2.6 billion in annual revenue loss from these tax changes since 2013 and make it more difficult to make decisions that responsibly balance the state budget.

The near term prospect of state policymakers raising revenue is real.  It is not hypothetical.

Indeed, in the briefing of House Finance on the bill, the Senate sponsor made clear that many other taxes could be raised should the state need to meet growing needs—franchise taxes, sales taxes and more.  He also made clear that many deductions or credits could be gotten rid of, including reductions or elimination of the standard deduction.

The income tax cap is not about holding taxes low for everyone. It is about limiting the tools available to future policymakers and locking in the income tax cuts that have primarily benefited the state’s wealthiest taxpayers.

Check Also

A half dozen economic challenges that tax cuts at the top don’t fix

North Carolina legislative leaders are once again debating ...

Top Stories from NCPW

  • News
  • Commentary

That sleek flat panel TV with the ultra high-definition screen — or the anvil of an ancient model th [...]

Restoring the "Silent Sam" Confederate monument to its original place at UNC-Chapel Hill i [...]

Jose Blanco dreams of being a U.S. Marine and fighting for the country he grew up in. “I just want t [...]

It appears that Thomas Farr is back in the game – the North Carolina redistricting game, that is. Th [...]

We aren’t in an economic downturn yet, but economists who find themselves marveling at the historic [...]

Downtown Raleigh recently made the front page of the New York Times as an exemplar of gentrification [...]

Just under sixteen months ago in an essay entitled “Darkness descends on the General Assembly,” I ex [...]

“Governor Cooper is failing when it comes to helping minority students. Don’t let him take away your [...]