NC Budget and Tax Center, race

Low-income taxpayers in NC pay more of their income in state and local taxes each year than the richest taxpayers

A new study released today by the Institute on Taxation and Economic Policy (ITEP) finds that the North Carolina tax system is regarded as the 31st most regressive because low-income taxpayers are asked to pay more in state and local taxes as a share  of their income compared to the rich.

The study, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, analyzes tax systems in all 50 states. The analysis evaluates all major state and local taxes, including personal and corporate income taxes, property taxes, sales and other excise taxes. According to their findings, the lowest-income North Carolinians pay 1.5 times more in taxes as a percent of their income compared to the state’s wealthiest residents. As illustrated below, the lowest 20% of North Carolina taxpayers pay 9.5% in total taxes as a percentage of their income, while the top 1% of North Carolina taxpayers pay 6.4% in total taxes as a percentage of their income.

Source: Institute on Taxation and Economic Policy

The wealthiest North Carolinians continue to benefit most from our growing economy and the state tax code is supercharging those gains. It’s not unreasonable to ask the highest-income residents and corporations to pay a share of state and local taxes that gets closer to the share that taxpayers with poverty-level incomes pay or that seeks to balance what is now an upside down tax code.  It makes certain that those who spend more of their income have more income to spend locally. It is also good for our fiscal position as a state.  It turns out, more progressive rate structures are better able to keep up with a growing economy and thus fund the services and infrastructure that support thriving communities.

Sales taxes play a critical role in the regressive and consequently inequitable nature of the North Carolina tax system. Like most other states, North Carolina relies on sales and excise taxes (30.7% of the 2018-2019 approved budget) as a primary mechanism to raise revenue. However, in North Carolina, sales and excise taxes are the most regressive taxes when compared to income and property taxes. The lowest 20% of North Carolina taxpayers 6.1 percent in sales taxes as a percentage of their income while the top 1 percent pays less than 1 percent in sales taxes as a percentage of their income.

Source: Institute on Taxation and Economic Policy

 Equally important are the racial implications of regressive state and local tax systems. Tax codes worsen the racial wealth divide when they tax low-income people at higher rates than the wealthy, tax income derived from wealth (e.g. capital gains) at a lower rate than income derived from work, and heavily rely on consumption taxes. A recent study on the Tax Cuts and Job Act from ITEP and Prosperity Now report regarding changes to the federal tax code report similar findings— communities are color benefit the least from tax systems that reward the wealthy, who are overwhelmingly White. Moreover, tax cuts in recent years in North Carolina have consolidated the racial wealth divide by delivering the greatest share of net tax cuts to White taxpayers.

State lawmakers have control over how their tax systems are structured. This latest Who Pays data makes clear that our state’s failed tax-cut experiment is maintaining a tax code that privileges the few at the expense of us all.

Martine Aurelien is a Policy Fellow at the Budget and Tax Center, a project of the North Carolina Justice Center. Her work focuses on equitable economic opportunities, tax policy, race equity, and systems level policy solutions. 

Courts & the Law, race

Monday maptime: Post-election, keeping tabs on the hate groups

This map shows the state headquarters of 29 known hate groups in North Carolina.

This map shows the state headquarters of 29 known hate groups in North Carolina. (Map: Southern Poverty Law Center)

President-elect Donald Trump has said he wants to build a wall along the U.S.-Mexican border to keep our southern neighbors out. Pastor Charles L. Worley of Providence Road Baptist Church in Maiden also wants to build a fence, but to keep gays and lesbians corralled behind a 50-to-100-mile electrifed fence to die.

Worley’s comments in 2012 put his church near Charlotte on the Southern Poverty Law Center list of North Carolina’s 29 hate groups. The SPLC has also mapped the headquarters of these organizations both nationwide — there are 892 — and state by state.

North Carolina’s who’s who of hate includes variations on traditional racist groups like the neo-Nazis, the Ku Klux Klan and the Black Separatist Nation of Islam.

There are also relative newcomers, such as Americans for Legal Immigration, which is based in Raleigh. Led by William Gheen, ALI-PAC reared its head about 10 to 12 years ago. The group was particularly active in the mid-’00s, when it found some sympathizers in the state legislature (Rep. George Cleveland, for one), including several that convened an immigration committee. That committee made a lot of noise but accomplished relatively little.

The Advanced White Society of Mt. Airy is a white supremacist group  led by a defector from the neo-Nazi National Socialist Movement. The national HQ of the League of the South is in Alabama, but North Carolina members of this neo-Confederate organization are centered in Wilmington. (The League’s website account has been suspended.)

The SPLC has received more than 200 reports of hate crimes, including harassment and vandalism, since Election Day.