NC Budget and Tax Center

A lesson for NC: Raise taxes on high earners and everyone reaps the benefits

Across the country, voters passed a number of the progressive ballot measures , bringing millions of people in states like Florida, Colorado, Louisiana and Arizona closer to realizing higher wages, securing paid leave and sick days, and reducing inequality.

After more than nine months of the COVID-19 recession — on top of a decade of slow growth that failed to reach all Americans —people are looking for proven policies that will protect their families from further income losses, that will move their communities past the harmful reach of a paycheck-to-paycheck economy and on to the stability and promise of improved well-being.

There is also a growing recognition that public institutions — and adequate funding of them — is essential to our quality of life and to the support of our democracy. 

For example, the ballot measure Proposition 208 in Arizona.  It asked voters to support an increased tax rate on higher incomes to fund public education, which has long fallen short of the standards for a quality education for the state’s children. By placing an income tax surcharge of 3.5% on incomes over $250,000 for single filers or $500,000 for joint filers, Arizona schools will have the resources for instruction, student supports and teacher pay, as well as professional development of new teachers.

Such a proposal in North Carolina would go a long way to helping  to fix the documented constitutional violation in our state of providing a sound, basic education to every child. If North Carolina raised its current flat income tax rate of 5.25% by just 3.5 percentage points, bring it to 8.75% only on high-wage earners, as in Arizona — that would provide $1.12 billion for investment in public education. Given North Carolina’s income tax cap, even raising the rate on these higher incomes to the limit would provide $560 million in resources. 

Ninety-nine percent of the tax increase would affect the top 1%. The bottom 95% of taxpayers in North Carolina would experience no change in their income taxes.

It makes sense for North Carolina’s policymakers to start looking at higher rates on higher incomes. Not only has the state failed to meet its constitutional obligation to provide every child with a sound, basic education, but the pandemic is also wreaking havoc on public schools across the state. Economic fallout from the virus has revealed the threadbare supports resulting from a decade of underinvestment in public health, affordable housing and social services. 

For North Carolina, the fix to our current challenge of growing inequities and hardship will likely require additional changes, as well as work to remove policies like the arbitrary income tax rate cap in the state Constitution. It is therefore all the more urgent that policymakers get to work right away; like the pending vaccines developed from years of research and investment, starting to invest now in our future will make us all more secure. 

One Comment

  1. Charles Keeling

    November 19, 2020 at 10:49 am

    I agree wholeheartedly with raising taxes in a graduated manner on those with the highest incomes. Instead of a flat tax which favors the rich by shifting the burden of taxation onto the poor and middle class (reverse Robin Hood), we need to implement “flat pain”–a system of taxation that causes equal “pain” (sacrifice) across all income levels. To see how regressive a flat tax is, consider how unfair a tax would be if it were TRULY flat–that is, if each taxpayer were assessed the same DOLLAR AMOUNT in taxes.

    We have handicapping in golf and the same principle should apply in taxes.

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