Falling Behind in NC, NC Budget and Tax Center, Poverty and Policy Matters, The State of Working North Carolina

Today is EITC Awareness Day – also referred to as the Earned Income Tax Credit (EITC). The EITC is a federal tax credit that encourages work by boosting the income of low- and moderate- income working people and offsets federal payroll and income taxes. The EITC has proven to be a powerful tool in helping lift families out of poverty and improving the well-being of young children.

In 2007, a state EITC was established to help further boost the wages of low- and moderate-income workers in North Carolina and offset the higher share of state and local taxes they pay as a percent of their income compared to high-income workers. More than 900,000 North Carolinians claimed this tax credit in 2011, according to the most current tax information provided by the NC Department of Revenue. The impact of the EITC spans across the state, with taxpayers in each of the state’s 100 counties claiming the tax credit (see this interactive map).

Unfortunately, this tax filing season will mark the last year that low- and moderate-income North Carolina workers will benefit from the state EITC. State leaders allowed the state EITC to expire at the end of last year and chose not to extend the tax credit as part of the tax plan passed last year. As a result, the expiration of the state EITC represents a tax increase for more than 900,000 hardworking low- and moderate-income North Carolina taxpayers, for which every dollar counts in their efforts to make ends meet.

NC Budget and Tax Center

At a time when we should be boosting investments to ensure that the Tar Heel state can compete for good-paying jobs in an increasingly knowledge-based economy, our legislative leaders have taken a different path. Our prized public 4-year university system serves as an example.

Since 2008, state funding on a per student basis within the UNC System has been cut by nearly 16 percent when adjusted for inflation. Managing these funding cuts have meant reducing course offerings, which can prolong the time it takes students to graduate; reducing academic- and student-support services; and steady tuition hikes. For the 2014 academic year, the average tuition and fees cost with the university system is around $6,100, up from around $4,400 in 2008 – an increase of nearly 40 percent.

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NC Budget and Tax Center

In case this news hasn’t reached readers, North Carolina residents should expect to begin paying sales taxes on their online purchases through Amazon.com (Amazon), the online retailer, beginning next month. Come February 1st North Carolina will become the 20th state in which Amazon collects a sales tax on online purchases.                

Since Amazon does not have physical, brick-and-mortar stores or operations here in North Carolina, the company is not required by law to collect a sales tax on online sales made to North Carolina residents. North Carolina taxpayers are supposed to voluntarily report their online purchases on their state income taxes and pay a “use tax”, but it appears that few taxpayers do so considering the significant loss of revenue for the state, as well as for cities and counties.

The NC Department of Revenue estimates that the state loses as much as $214 million in online sales taxes each year, according to a news report. Read More

NC Budget and Tax Center

This month, taxpayers receiving their paychecks are seeing changes in their take-home pay.  Some will see more, some less since the tax plan passed last year delivers income tax cuts depending on individual taxpayer circumstances.

The benefits from the new tax law will accrue primarily to the wealthiest taxpayers and profitable corporations. In total, the tax plan passed last year reduces revenue by nearly $525 million over the next two years. The foregone investments for our communities that will result from these tax cuts will impact us all.

Consider what could have been done to improve the classroom experience of our students in K-12 public schools if policymakers hadn’t chosen to cut taxes for the wealthy and profitable corporations. These dollars could have been used to provide a package of investments in public education such as:

  • Keeping 1 in 5 teacher assistant jobs in FY15
  • Doubling current funding for textbooks in FY15 Read More
NC Budget and Tax Center

If you dressed a wolf in sheep’s clothing, would you then believe it was a sheep?

The leadership in the General Assembly and its allies hope you will. Proponents of the state’s new tax law are trying desperately to justify it, most recently by citing pennies in tax cuts for low- and middle-income North Carolina families in 2011, hoping you’ll ignore the harm the recently passed package will cause.

Most of the 2013 tax plan goes into effect this year, and for the vast majority of North Carolinians the picture is bleak.

The Budget and Tax Center’s analysis of the plan shows that when you consider all the tax changes and compare them to previous tax law, on average, people making under $84,000 a year – the bottom 80% of North Carolina taxpayers will see their taxes go up.

In a new analysis, proponents of the plan are touting the 2011 expiration of a temporary sales tax increase as evidence that low- and middle-income earners are better off.  They fail to note that lawmakers allowed a surcharge on high-income earners to expire (a tax cut of around $200 million) in 2011 too.  The expiration of the surcharge will actually generate an even greater tax cut for high-income taxpayers.

There are other key facts that get soft-pedaled in the Locke Foundation’s analysis. Read More