NC Budget and Tax Center

If you listened to Governor McCrory’s press event on Tuesday, you might be a little confused about the tax plan that pasted last year and what it means for our state.

Tax reform should be about modernizing the tax code in a way that ensures the system can continue to serve its fundamental purpose: providing enough revenue to support core public services. It should also be ensure greater revenue stability while not asking more from low- and middle income taxpayers as a share of their income than from wealthy taxpayers.  But all three of these principles of a sound tax system will be compromised under the tax plan passed last year.

Here are half dozen things that you should know that you didn’t hear at Governor McCrory’s press event: Read More

This tax season marks the final year North Carolina taxpayers will file their income taxes under the state’s old tax code. By next year the increased tax load for many North Carolina taxpayers will be apparent as a result of the tax plan passed by state leaders last year.

Today, the Budget & Tax Center released a report that highlights how the tax plan passed last year shifts the responsibility of paying for public investments to middle- and low- income taxpayers while providing generous tax cuts to the wealthy and profitable corporations. The report highlights various elements of the tax plan that fundamentally changes the state’s tax system and, subsequently, who pays taxes in North Carolina.

The tax plan passed last year replaces the existing graduated personal income tax rate structure with a flat tax rate that will largely benefit wealthy taxpayers who will now pay a much lower income tax rate. A number of tax provisions that benefit middle- and low-income families – such as the personal exemption and child and dependent care credit – are eliminated under the tax plan. Read More

The last weekend before Tax Day is here and in the last minute rush to get your returns in, it can be helpful to reflect on why taxes matter.  Taxes are as some have said “the price we pay for civilized society” and more simply the way in which we invest together in building a stronger state through the creation of opportunity and establishment of a basic quality of life for all North Carolinians.

In the aftermath of the disastrous tax plan that passed last year, just how taxes play a role in our everyday lives has become clearer.  Taxes make it possible for our children to have a quality classroom experience, taxes fund monitoring and inspection that protect the quality of our water, taxes build the infrastructure that connect workers to jobs and support business in job creation.  And yet, the tax plan has created a self-imposed budget crisis that will undermine our ability to invest in these foundations of a strong economy.

Beyond that fundamental role of funding core public services, who pays under the tax code matters too.  And the tax plan passed last year makes an already upside down even worse: low- and middle-income taxpayers pay more as a share of their income than wealthy taxpayers.  This not only hurts families who are trying to make ends meet on falling or stagnating wages, it compromises the long term ability of the tax system to fund public services since it taxes where the income growth is not occurring, which creates a gap as needs increases but revenue can’t keep up. Read More

Some underling and troubling trends are revealed in the Fiscal Research Division’s newly released third Quarterly General Fund Revenue Report, which provides an assessment of revenue for the state. Not much has changed since the Division’s second quarterly report. Both reports foreshadow some of the particular challenges of the new tax plan—namely the fact that tax rate reductions for profitable corporations will be big revenue losers for the state.

On net, the General Fund was $12.1 million above the $14.5 billion revenue target for the first-three quarters of the current fiscal year that ends in June 2014. This marks a reduction from the $83 million point-in-time “surplus” that accrued by the end of the second quarter. The gap could shrink even further by the end of the month depending on any volatility in revenue collections post-tax season—a factor dubbed as the “April Surprise.”

Revenue collections were ahead of target by the end of the third quarter largely due to stronger-than-expected performances by the sales tax and the corporate income tax on net. Read More

Partial privatization of the N.C. Department of Commerce took another step closer to reality yesterday when the Economic Development and Global Oversight Committee (or EDGE Committee) reported out updated enabling legislation that authorizes the establishment of a nonprofit corporation to conduct significant pieces of the state’s business development activities. Using last year’s SB 127 as a template, the new version of the bill includes important changes—some for the better, some for the worse, and some that make us go “huh?”

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