NC Budget and Tax Center

13% of NC households would face a tax increase under Senate GOP tax plan

A new report finds that the Senate tax plan, which was just introduced on Nov. 9, would raise taxes on some families while giving the largest share of tax cuts to wealthy Americans and foreign investors. According to the Institute on Taxation and Economic Policy, of those tax cuts that would benefit households in the U.S., more than a quarter would go to the richest 1 percent and half would go to the richest 5 percent.

The middle fifth of income earners in America, households that are literally America’s middle-class, would get just about a tenth of the tax cuts.

In North Carolina, analysis shows that 50 percent of the federal tax cuts would go to the richest 5 percent of residents, and 13 percent of households would face a tax increase, once the bill is fully implemented. Importantly, as the report states, “One might think that the richest Americans would receive the largest tax cuts simply because they have most of the income. But even when measured as a share of income, the tax cuts for the richest five percent of Americans are more generous than the tax cuts for other income groups.”

In North Carolina we also find that, between 2019 and 2027, many middle-income households would see an increase in their tax load under the Senate proposal.

Over the next 10 years, middle-income households–those with incomes between 48,000 and 82,000–in our state would be affected the most: Their share of the tax increases in the plan would nearly double, going from 7 percent in 2019 to 13 percent in 2027. This contradicts what many Republican Congressional leaders have said regarding its effort to target the middle class with tax cuts.

We have previously written that the House and the Senate in Congress are currently rushing tax legislation to pass it right around Thanksgiving and ensure President Trump has a bill on his desk around the holidays. Based on this latest analysis, it is clear that rushing to pass these flawed proposals will be no gift to everyday North Carolinians.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Why rushing major tax legislation is a bad idea

President Trump and Congressional leaders have unveiled a tax plan that both the Senate and House want to rush through the policy process so that the President can sign it into law around the holidays.

The House tax bill was just unveiled last week, on November 2, yet the House will vote on the bill next week. On the other side, the Senate unveiled its tax bill just yesterday, November 9, and plans to vote on it in less than two weeks.

Passing such a significant overhaul of the U.S. tax code on a short timeline is a bad idea.

Rushing to pass in less than one month the first significant overhaul of the U.S. tax code in more than 30 years will not allow for the review and consideration of all of the major pieces included. For comparison purposes, the last major policy legislation in our country, the Affordable Care Act, took nine months to become law from the time it was first introduced.

Furthermore, given that this legislation would have wide range implications in our country starting next year, it will be important to assess these potential implications and address them ahead of enactment. Overall, the proposed tax bill is made up of more than 100 special provisions with many of them having billion dollar implications to our federal budget.

While preliminary analysis shows that the tax plan will deliver the greatest share of the tax cuts to the richest 1 percent and contribute to the country’s deficit, there are many emergent impacts that need fuller examination.

For example, just yesterday estimates from the Center on Budget & Policy Priorities suggest that more than 350,000 children in North Carolina will be fully left out of the increase in the Child Tax Credit.

If our elected officials are serious about getting tax overhaul right then they need demonstrate this by ensuring there is open debate, input from key stakeholders, and time for adequate analysis.

Rushing this tax bill as it currently stands in order for the President to sign something during the holidays would be no gift to the majority of working Americans or our democratic process.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center, Trump Administration

816,000 NC kids would be left out of GOP tax bill’s Child Tax Credit proposal due to low income

House Republican leaders highlight an increase in the maximum value of the federal Child Tax Credit (CTC) as their tax bill’s signature benefit for working families, but the provision completely excludes 354,000 children in North Carolina whose parents work in low-paying jobs, according to a new report from the Washington, DC-based Center on Budget and Policy Priorities. Another 462,000 North Carolinian children in low-income working families would receive less than the full $600 increase in the credit that would be available to higher income families.

Altogether, about 816,000 North Carolinian children in working families would either be excluded entirely or only partially benefit from the increase in the CTC. A larger share of North Carolinian children are excluded or only partially benefit than in the country as a whole.

Nationally, roughly 23 million children would be partially or entirely excluded from the House Republicans’ plan, even as it newly extends the CTC to families with incomes between $150,000 and $294,000. For example, a single mom of two working full time at the minimum wage would get no benefit from the CTC expansion under the House Republican plan while a married couple earning $230,000 would receive a new $3,200 benefit.

Republican Senate leaders have suggested that they may increase the CTC further when they release their tax bill this week. Unless they revise the proposal’s basic structure, however, it would provide far larger benefits to higher income families than to families that face difficulties affording the basics.

Analysis on the Children and Top Working Parent Occupations Affected

Analysis shows that of the roughly 23 million children across America that would be partially or fully excluded from the CTC increase:

  • 8 million are children under the age 6
  • 7 million are Latino children
  • 3 million are white children
  • 6 million are African American children
  • 600,000 are Asian children

According to the report:

“The average income of working families with children that would be partially or entirely left out of the CTC increase is $22,000.  Among these working families, two-thirds include at least one parent who works full time for most of the year.”

Analysis of available data shows that the top occupations of working parents fully or partially left out of CTC proposal in house tax bill are:

  • Office and administrative support
  • Sales
  • Food preparation and serving
  • Building and grounds cleaning and maintenance
  • Construction and extraction
  • Transportation and material moving
  • Manufacturing
  • Personal care and service
  • Health care support

Based on this latest report it is clear that rushing this tax legislation without real debate, without informed analysis, and without input from key stakeholders is not the way our Congress should operate.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

House tax plan is off by over $700 billion, will add more to the U.S deficit than Trump-GOP want to admit

When the House released its Trump-GOP tax bill last week Americans found out that this proposed legislations would increase the U.S. deficit by $1.4 trillion over the next ten years. However, further analysis shows that after accounting for budget gimmicks and interest costs the real additional burden to the U.S. deficit is well over $2 trillion.

In other words, the tax plan that is being touted by President Trump and other congressional leaders is off by over $700 billion.

Here’s a visual that explains the math behind this greater hit to the country’s fiscal position from the tax plan.

The major drivers of the difference in reporting is that major provisions end arbitrarily after just five years, making them look cheaper than they really are, and the cost of interest.

These math problems with the tax plan will face a real challenge in the Senate which is expected to release its version of the tax bill this week. The approach used by the Senate will have to be realistic as the math used by the House does not comply with the “Byrd Rule”. If a bill adds to the federal deficit after a decade, the Senate will not be able to pass a bill through the process known as reconciliation, which allows legislation to pass with only a simple majority of 51 votes.

That our elected officials in Washington continue to propose tax and budget proposals that contain trillion dollar math errors or gimmicks should be worrisome for all Americans. Good policy that is intended to help Americans should not be made up of gimmicks. If Congress is really serious about reforming a tax code that has not seen major changes in over 30 years it needs to ensure that its numbers are right.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

 

NC Budget and Tax Center

House GOP tax plan: Benefit for richest 1% in North Carolina grows over time

A 50-state analysis of the House tax plan released last week reveals that in North Carolina the wealthiest 1 percent of North Carolinians will receive the greatest share of the total tax cut in year one and their share would grow through 2027. Further, the value of the tax cut would decline over time for every income group in North Carolina except the very richest.

House leadership continues to tout this tax proposal, which will increase the federal deficit by $1.5 trillion over the next decade, as a plan to boost the middle class. But a closer examination of the bill’s provisions reveals that it is laser-focused on tax cuts for the nation’s highest earning households. The wealthiest North Carolinians share of NC’s tax cuts would grow over time due to phase-ins of tax cuts that mostly benefit the rich and the eventual elimination or erosion in value of provisions that benefit low- and middle-income taxpayers. For example, after five years, the bill eliminates a $300 non-child dependent credit that benefits low- and middle-income families while fully repealing the estate tax in year six for the very large estate subject to the tax.

More specifically, the 10-year outlook for the plan reveals that by 2027, the top 1 percent of households in North Carolina share of tax cut would increase from 30 percent in year one to 43 percent by 2027, for an average cut of $55,030 in 2027. Middle-income taxpayers’ average tax cut would erode to $660 from $770, and the poorest 20 percent’s average tax cut would decline from $220 to $120.

The bottom line: This tax bill will hurt North Carolina taxpayers in the short- and long-term by primarily benefiting the wealthiest in the state and undermining public investments that serve us all today and in the future.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.