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.

 

NC Budget and Tax Center

U.S. defense industry very concerned with Trump-GOP tax plan, which adds to the deficit

House congressional leaders are expected to release their tax plan today, Nov. 2 – a day after it was originally scheduled to come out.

This is the tax bill that President Trump has been promoting and that analysis has shown will primarily benefit the wealthiest 1 percent in America and will cause the U.S. deficit to increase by $1.5 trillion.

As all Americans prepare for Congress to muddy the waters about what this tax bill means here’s a simple formula to keep in mind:

The U.S. defense industry appears to understand the reality of this formula and is now one more group that is very concerned about future federal budgets cuts as the U.S. deficit is increased simply to pay for GOP tax cuts.

Defense News reports that the U.S. defense industry is asking Congress “to avoid adding to the deficit because companies are fearful that higher deficits will encourage cuts to defense spending in the long run.”

The core issue that the defense industry brings up is exactly the same concern various other groups across North Carolina and America have brought up regarding the future budget cuts to Pell Grants and student loans, Medicaid, Medicare, food assistance through SNAP, Social Security Disability Insurance, and housing assistance – just to name a few.

As we stated back in March, when the White House released its first budget blueprint:

“The recipe of what has truly made America great over time has been its ability to prioritize effectively various policies, including security, in order to serve all Americans and provide for a more prosperous future that considers a wide array of current and emerging issues.”

As it relates to the federal budget and the proposed GOP tax plan, the ultimate question for the president and Congress at this time is: Which of the following is more important?

  1. Tax cuts for the wealthiest and most profitable corporations; or
  2. Investing in our security and the building blocks that promote thriving communities in this country

Based on the choices that the president and Congress have made recently, Americans across the country need to make their voices heard now to help them choose the answer that will strengthen our country not hurt it.

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

As Congress rushes to pass tax legislation, consider the impact to NC’s state and local taxes

Congress is very close to giving a tax bill to President Trump by the holidays that would allow the wealthiest to pay less in taxes and result in a bad deal for everyone else.

As Congress rushes to make all of this happen, it is important to know that the tax framework released by President Trump and Republican leaders contains proposals that will not only put the federal budget on a path to higher deficits, but will also worsen the state’s fiscal health.

Here’s how: President Trump and congressional Republican leaders plan to end the federal deduction for state and local taxes (SALT). As researchers at the Center on Budget & Policy Priorities argue, the SALT deduction supports state and local budgets because it makes higher income filers, in particular, more willing to support increases in their state and local taxes because they can deduct it from their federal income tax return. Eliminating it would make it harder for North Carolinians to maintain funding for schools, roads, public safety, homeownership and other building blocks of thriving communities, at a time when the federal government would shift more of these investments to state and local governments to fund on their own. That is because the repeal of the SALT deduction is being done to pay for rate reductions that benefit the country’s wealthiest taxpayers.

In 2015, 1.2 million North Carolinians claimed SALT and the average value of the deduction was more than $9,500.

Concerns about ending SALT have been expressed by state and local government groups since the president and Congressional leaders presented their tax framework. For example, the National Association of Counties released a statement expressing major concerns:

“Counties are opposed to this $1.3 trillion federal money grab. Eliminating the SALT deduction would force undue burden upon the backs of middle-class homeowners in every state. Even if the standard deduction were doubled, middle-class homeowners would see their federal tax bills increase by an average of $815.”

Tax changes should not put at risk our state’s fiscal health and our nation’s. Instead, we should be pursuing the design of a tax code that can responsibly support the services that our communities need to thrive.

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

U.S. Senate passes budget framework that slashes trillions and increases deficit. What’s next?

The U.S. Senate narrowly voted 51-49 to pass its budget resolution. Unfortunately, the budget passed by the Senate has many similarities to the House budget that was passed less than two weeks ago. Overall, this budget framework will harm millions of Americans and set our country in a downward trajectory as, over the next 10 years, it will:

  • increase the U.S. deficit by $1.5 trillion;
  • cut Medicaid by $1 trillion;
  • cut Medicare by $473 billion; and
  • slash over $4 trillion dedicated to programs for student and families such as Pell Grants and student loans, food assistance, housing assistance, income assistance for children with disabilities, social security disability insurance, and others.

Why did the senate pass this budget and what happens next?

Republicans in the Senate voted for this budget because it gets them one step closer to passing tax legislation proposed by President Trump without needing any votes from Democrats.

The latest from the House Speaker is that they intend to vote on a tax bill next month.

What does this tax plan mean for the U.S? Read more

NC Budget and Tax Center

House GOP passes budget to slash Medicaid and Medicare by $1.5 Trillion over the next 10 years

The U.S. House of Representatives has passed a federal budget for 2018 that calls for more than $5 trillion in cuts over the next 10 years to multiple important programs that help communities and working families all across America.

It also contains the latest in a series of backdoor approaches to reduce health insurance coverage for millions of Americans by proposing deep cuts to Medicaid and Medicare after the attempted repeal of the Affordable Healthcare Act was not successful. Instead of working on ways to stabilize health-insurance markets congressional leaders are now directly attempting to disrupt health care by cutting effective health care program budgets that have previously received bipartisan support and helped millions of Americans for over 50 years.

The House passed budget cuts Medicaid by $1 trillion and Medicare by more than $470 billion over the next 10 years. Medicaid provides health coverage to eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities, while Medicare serves individuals 65 or older and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant).

These drastic budget cuts mean more than two million North Carolinians enrolled in Medicaid and the 1.2 million enrolled in Medicare, as well as those that could qualify in the coming years, would be affected by eliminated and reduced services. Additionally, North Carolina’s own budget would also be affected as Congress plans to shift massive costs to the states.

So what happens next? The U.S. Senate is planning to pass its own version of the federal budget as early as next week. In the meantime, it will be important for North Carolina’s congressional delegation to stand up for our health and well-being back home. Taken together, the House passed budget and the tax plan recently proposed by President Trump would do the very opposite by reducing federal revenue by $2.4 trillion, increasing the deficit by $1.5 trillion, and giving 67 percent of the tax cuts to the richest 1 percent of Americans in 2018.

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