Eliminating estate tax provides tax cut to North Carolina’s wealthiest individuals

8 Comments

May 8, 2013 at 4:30 pmCategory:NC Budget and Tax Center

by

Comprehensive tax reform remains vague and “short on details” as the 2013 legislative session is beyond its halfway point. Nevertheless, stand-alone bills continue to make their way through the legislative process that would provide tax cuts to the state’s wealthiest individuals. Policymakers have just voted in the House to eliminate the estate tax and both the Senate leadership and the Governor have stated their commitment to do the same.

Proponents of eliminating the estate tax argue that the tax punishes small businesses and small farms in North Carolina. Evidence shows this claim to be false. The estate tax applies to a small number of taxpayers in North Carolina – less than one percent. For tax year 2011, only 23 North Carolina tax filers were subject to the estate tax, according to the North Carolina Department of Revenue. The reality is that the overwhelming majority of small businesses and small farms will not a pay an estate tax while heirs of the wealthiest estates in the state will. Read More…

U.S. Senate bill would require online retailers to collect sales taxes

May 6, 2013 at 2:19 pmCategory:NC Budget and Tax Center

by

Today the United States Senate is scheduled to debate and possibly vote on a bill titled the Marketplace Fairness Act of 2013, which would authorize states to require businesses to collect state and local taxes for products sold via the internet. Currently, states can only require retailers to collect sales taxes if a respective business has a physical presence in a state. And while the tax is still legally due to the state regardless of whether sales occur on-line, consumers don’t always know or comply with this requirement.  

As internet sales have steadily grown as a share of total retail sales, state and local government sales tax collections have been impacted. For 2012, internet sales in the U.S. totaled $226 billion, an increase of nearly 16 percent compared to 2011, according to estimates by the U.S. Department of Commerce. Read More…

Progressive income taxes are an important part of state tax systems

April 19, 2013 at 4:43 pmCategory:NC Budget and Tax Center

by

Progressive income taxes are an important part of state tax systems and offer advantages that far outweigh the volatility in revenue during a recession, according to a recently released report by the Center on Budget and Policy Priorities (CBPP).

Proponents of cutting and eliminating personal income and corporate income taxes contend that doing so will spur economic growth and make the state’s revenue system more stable. However, the CBPP report highlights that eliminating income taxes would further challenge the state tax system’s ability to generate adequate revenue for public investments that promote economic growth and opportunity. The report notes that while state personal income taxes are subject to wider fluctuations, over the long-term income taxes grow more than other state taxes, and thus better reflect economic performance.

The report highlights ways that states can manage the ups and downs of state tax systems without eliminating or flattening state income taxes. Building up rainy day reserves, using extra revenues from good times for one-time expenditures, and shoring up unemployment insurance trust funds are some of the examples presented. As policymakers pursue comprehensive tax reform, maintaining the personal income tax helps ensure that the state’s tax system raises adequate revenue for investments in the building blocks of economic growth.

Local School Systems Face Challenging Budget Environments for Upcoming School Year

April 16, 2013 at 9:07 amCategory:NC Budget and Tax Center

by

As local school boards begin to plan K-12 budgets for the coming school year, they continue to feel the squeeze from a still-fragile economy and continued cuts in state support for public education. Since FY2009, state support for K-12 education has been cut by more than $1.3 billion and Governor McCrory’s proposed budget for FY2014 continues this trend with $85 million in cuts to K-12 education.

The budgeting environment will likely be even more challenging for the upcoming school year with the expiration of one-time federal funding. North Carolina received $297 million in federal dollars for K-12 education (“Ed Jobs” funding) as part of the American Recovery and Reinvestment Act approved by Congress in 2010. All local school systems received Ed Jobs funding, which was used to retain existing employees, recall or rehire former employees and to hire new employees. Local school systems were required to spend all Ed Jobs funds by October 2012 and no additional funding will be available for the upcoming school year. Read More…

Corporate Income Tax Cuts Would Harm, Not Help State’s Economy

April 11, 2013 at 9:15 amCategory:NC Budget and Tax Center

by

North Carolina lawmakers are barking up the wrong tree when they claim that corporate tax cuts, such as those proposed in the state Senate, will spur job creation and economic growth. In reality, those tax cuts will do more harm than good, in both the short- and long-term.

Every dollar that Senate Bill 677 would give away in a tax cut has to be made up for with a tax increase on another business or individual or with cuts to schools, health care and other vital services that provide a strong foundation for our economy.

This tax plan would cost the state $344 million once the tax cuts were fully phased in, according to the Legislature’s Fiscal Research Division. Read More…