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

Governor Cooper proposes budget within confines of current tax code

Governor Cooper released a proposed budget for the ...

Top Stories from NCPW

  • News
  • Commentary

Southside Ashpole Elementary School in Robeson County looks like most elementary schools in rural No [...]

President Donald Trump suffered a stinging policy setback last week when, notwithstanding the remark [...]

Fifty-one duplicate invoices. At least $20,000 in excess payments. And one nonprofit receiving a dis [...]

WASHINGTON -- Sen. Thom Tillis made a stunning reversal on Thursday, declaring he would support Pres [...]

The post Profiles in courage…and cowardice appeared first on NC Policy Watch. [...]

It’s Sunshine Week, and things have never been gloomier for the newspaper industry. This year’s annu [...]

Gov. Roy Cooper is an enormously skilled politician with a top-flight staff and many years of experi [...]

The post For a few dollars more… appeared first on NC Policy Watch. [...]