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NC Budget and Tax Center

Low-income families actually fare worse under House and Senate tax plans

Proponents of the House plan claim that doubling the standard deduction and child tax credit provide a generous benefit to low- and middle-income taxpayers in North Carolina. However, what proponents fail to acknowledge is that, at the same time, they are eliminating the personal exemption allowance and allowing the state Earned Income Tax Credit to expire, which effectively makes our current tax law a better bet for these taxpayers.

Proponents support this claim by highlighting that doubling the standard deduction would make the state have the most generous treatment of the first dollar of income in the country. This claim is simply false. Read More

NC Budget and Tax Center

A report released today by the NC Budget and Tax Center highlights the Senate version of the House tax plan. Far from representing true tax reform, the tax plan would give massive tax cuts to the wealthiest North Carolina taxpayers and profitable businesses. Once all the tax cuts are fully in place, $1.3 billion less in revenue would be available to fund our schools and universities, public safety and other public investments that have positioned North Carolina as a leader among Southern states.

The BTC report highlights others aspects of the Senate tax plan worth noting. The plan does not address the state’s upside-down tax system, in which low- and moderate-income families spend a larger share of their incomes on state and local taxes compared to wealthy North Carolinians. Thus, the Senate plan will continue to ask more from those with the least amount of income and the wealthiest taxpayers will receive the lion share of the benefits of these tax cuts. Read More

Uncategorized

The Senate Finance Committee is currently debating and will likely vote on the Senate leadership’s new version of the House tax plan passed on Monday evening. This plan is an extremely costly one that provides huge tax cuts to North Carolina’s wealthiest residents and profitable corporations. The fiscal analysis provided with the tax plan shows that more than $1 billion in revenue would be lost each year once the plan is fully implemented. And, the cumulative impact over the next five years is equivalent to one-fifth of today’s budget. This means cuts on top of the drastic cuts enacted over the last several years. Read More

Uncategorized

At the Education Appropriations Subcommittee meeting today, the North Carolina House unveiled the education section of their budget bill. While the unfortunate convention of loading the budget with policy changes in the special provisions section is nothing new, the education-related provisions of the House’s budget proposal go exceptionally far.

Most notably, a bill creating a voucher program (HB 944) that would divert $100 million from public to private schools over the next three years is included in its entirety in the House budget’s 97 pages worth of public education special provisions. The controversial and unpopular voucher scheme faced bipartisan opposition when it was narrowly approved by the House Education Committee on May 27th. If this provision remains part of the budget, vouchers could become law in North Carolina without ever being subjected to a standalone vote on the floor of either the House or the Senate.

Here is a sampling of the many education policy changes embedded in the omnibus budget bill:

Students with Disabilities and Limited English Proficient students would be ineligible for North Carolina Pre-Kindergarten:  In spite of the fact that students with disabilities and limited English proficient students benefit most from early educational intervention, both are incomprehensibly removed from the eligibility definition in the Health and Human Services portion of the budget special provisions.  The income eligibility standard that families must meet to participate is also reduced from 75% of the State Median Income (equivalent to about $42,819 for a family of three) to 130% of the federal poverty level ($24,817 for a family of three).

Larger classes, especially in the early grades: Limits on class sizes in grades K-3 are removed, as are overall teaching load limits for teachers in grades 7-12.

No salary increases for teachers with masters degrees: In another hit to North Carolina’s already underpaid teaching force (currently ranked 46th in the nation in teacher compensation and falling fast), new teachers possessing masters degrees would no longer receive any salary supplement.  Currently new teachers receive a supplement of a little over $3,000 if they have a masters, accounting for about a 10% bump in pay.

Older school buses: The House special provisions replace the current law stipulating that school buses must be replaced every 200,000 miles or 20 years with a provision that buses won’t be eligible for replacement until they reach 250,000 miles. Buses operated for less than 150,000 miles are ineligible for replacement regardless of how old they are, and buses less than 15 years old could not be replaced until they reach 300,000 miles.

NC Budget and Tax Center

This is the sixth of a six-part blog series. (See Part 1, Part 2, Part 3, Part 4, and Part 5)

What would the House tax plan mean for North Carolina taxpayers? In this blog series we highlight the experience of sample taxpayers under the House tax plan. In conjunction with a distributional analysis of the tax plan which gives a better picture of the full impact, these fictional but true to life profiles will demonstrate that middle-, fixed- and low-income taxpayers would lose under this plan while the wealthiest will gain.

A few people do win under House tax plan

Janie and Jeff are owners of a successful chain of hardware stores in North Carolina. They are married with two college-aged children and earn about $1 million a year in household income. They live in Raleigh and also enjoy a vacation home in Wilmington.

Under the House tax plan, their tax load would go down by $11,169, or almost 15 percent compared to current tax laws. When they realize what the difference would be in their tax bill, they are pleasantly surprised. They decide that if the plan passes, they will set aside the additional money from the tax cut to boost their retirement savings.