NC Budget and Tax Center

Recent news reports highlight that not all taxpayers will benefit from the tax plan signed into law by Gov. McCrory last year. While disputed, this has been a major talking point for proponents of the tax plan – that all taxpayers will benefit from the income tax rate cuts. The General Assembly’s Fiscal Research Division discredited this claim last month, however, noting that the tax plan creates winners and losers and that some taxpayers will pay more in income taxes.

News reports note that proponents are now backing away from this false claim. A fact check by the Associated Press (AP) concludes that while the state’s income tax rate goes down for every taxpayer, this does not mean all taxpayers will actually pay less in overall state taxes. In response to AP’s findings, Gov. McCrory’s office responded that the governor did not say “every” or “all” taxpayer(s) would see more money in their paychecks as a result of the tax plan. State budget director Art Pope points to a temporary one penny sales tax that expired two years ago to downplay the fact that some taxpayers – particularly low-income families with children – will pay more taxes under the tax plan. BTC’s analysis of the tax plan takes into account the expiration of the one penny sales tax as well as the decision by state policymakers to also let the surcharge on high-income taxpayers expire. Implications from the tax plan have been reported in other news outlets as well (see here, here and here). Read More

NC Budget and Tax Center

The tax bill signed into law this year is fiscally irresponsible and bad for our state, but lawmakers could improve the situation by repealing part of the corporate income tax cut and paying for the rest by closing ineffective tax breaks that only benefit certain companies.

The corporate income tax cuts in the final tax plan are one of the biggest reasons why the state will have less revenue to invest in our roads, schools, and communities. The tax plan cuts the corporate income tax rate to 5 percent by 2015, from the current rate of 6.9 percent, and will reduce annual tax revenue by around $217.9 million in fiscal year 2014-2015 alone.

Meanwhile, the tax plan does little to rid the state’s tax code of costly and wasteful tax breaks that only help certain corporations or industries. Read More

NC Budget and Tax Center

The tax plan signed by Gov. McCrory includes huge tax cuts for profitable corporations that are unlikely to boost economic growth in the state and will reduce revenue for investment in our public schools, healthcare services for the elderly, and other important public investments.

By 2015, the corporate income tax rate is cut to 5 percent from the current rate of 6.9 percent and will reduce annual tax revenue by around $217.9 million in fiscal year 2014-2015. The corporate income tax rate is cut even further in future years if revenue meets a certain target – which is actually below existing revenue projections – and would reduce annual revenue by more than $423 million. These benefits will flow to less than 10 percent of North Carolina businesses. Read More

NC Budget and Tax Center

When the General Assembly’s Revenue Laws Committee met this morning to continue efforts to fix various problematic aspects of the tax plan signed into law by Gov. McCrory earlier this year, there was one key takeaway that shouldn’t have surprised anyone: contrary to the claim by proponents that all taxpayers would benefit from the income tax changes, not all taxpayers will receive a tax cut. 

When asked by the committee to confirm that all workers will benefit from the recent income tax changes, a General Assembly Research Division staffer informed the committee that there will be winners and losers and that some North Carolinians will see their state income taxes go up. The fact that the tax plan would ultimately produce winners and losers was known and acknowledged by the Research Division and legislators throughout the tax reform debate, the staffer noted.

And this is just taking into account changes made to the personal income tax, not the sales tax.

When ALL tax changes – income AND sales tax changes – are taken into account, middle and low income taxpayers who make less than $84,000 (the bottom 80 percent of taxpayers) on average will see their total state and local taxes increase, creating a tax code that favors the wealthy even more than before. This is the reality of the tax plan.

Hopefully this response by the General Assembly’s Research Division will convince proponents of the tax plan to finally acknowledge that not all taxpayers will receive a tax break under the plan.

NC Budget and Tax Center

Proponents continue to make the claim that all North Carolinians will benefit from changes in the tax plan signed by Governor McCrory earlier this year. The reality is that the tax plan includes costly income tax rate cuts and the elimination of credits and deductions that will mean 35 percent of taxpayers will pay more in income taxes. When ALL tax changes – income AND sales tax changes – are taken into account middle and low income taxpayers with income below $84,000 (the bottom 80 percent of taxpayers) on average will see their total state and local taxes increase, making the tax code even more upside down.

One of the particularly common refrains is that families will be protected because the standard deduction is doubled. However, for many, the doubling of the standard deduction is not sufficient to make up for the loss of the personal exemption, the refundable state Earned Income Tax Credit and other deductions and credits. 

In fact, the first dollar of income is taxed sooner than under current tax law. Read More