Archives

NC Budget and Tax Center
Posted by : Leave a comment In NC Budget and Tax Center

A new report released today by the Budget & Tax Center highlights how eliminating North Carolina’s taxes on capital gains would largely benefit those who need it least while making things worse for families struggling to make ends meet.

Some lawmakers and outside groups in North Carolina are pushing a plan that would benefit the wealthy at the expense of everyone else by ending state taxation of profits from selling artwork, vacation homes and other high-end items owned by relatively few North Carolinians. The proposal is part of a larger push to radically alter North Carolina’s tax structure to the detriment of the long-term well-being of the state and its residents.

Cap gains allocation

Key findings from the report include:

  • Eliminating capital gains from state income tax would reduce annual state revenue by $520 million, meaning even less revenue for public investments that help drive the state’s economy forward. This revenue loss would be in addition to the costly 2013 tax plan, which is projected to reduce state revenue by as much as $1.1 billion for the fiscal year that ends June 30.

Read More

NC Budget and Tax Center
Posted by : 5 Comments In NC Budget and Tax Center

The latest Who Pays? report released today by the Institute on Taxation and Economic Policy (ITEP) takes a look at the fairness of state tax systems. For North Carolina, the lowest income North Carolinians pay over 70 percent more in state and local taxes as a share of their income compared to the state’s wealthiest residents, the ITEP report highlights.

The lowest 20 percent of North Carolinians – with an average income of $10,700 – pay 9.2 percent of their income in state and local taxes, the study finds, compared to 5.3 percent for the top 1 percent, the average income for this group is $969,100.

North Carolina’s unfair tax system presents both short- and long-term challenges and concerns. The state’s unfair tax system not only contributes to widening income inequality in the short term, but also leaves the state struggling to raise adequate revenue for public investments in the long term, ITEP notes. These realities are already playing out in the North Carolina. As state lawmakers return to Raleigh this week for the 2015 legislative session they face an ongoing revenue shortfall as a result of tax cuts passed in 2013.

North Carolina has moved away from many features that create a fairer tax system. State lawmakers replaced a graduated personal income tax rate structure (meaning the higher one’s income, the higher one’s effective personal income tax rate) with a flat rate that doesn’t take into account a taxpayer’s ability to pay, allowed the state’s Earned Income Tax Credit to expire, expanded the sales tax base, and allowed the corporate income tax rate to be cut from 6.9 to 5 percent and potentially as low as 3 percent.

These changes have resulted in a sizable reduction in revenue, with the state now challenged with funding basic public obligations such as education and healthcare services for the elderly and poor. Returning to a graduated income tax rate structure, reestablishing a state Earned Income Tax Credit, creating a renter’s credit or an enhanced and refundable Child Tax Credit, and stopping further tax cuts that largely benefit the wealthy and profitable corporations are important opportunities to create a fairer state tax code.

A state tax code that works for all North Carolina taxpayers is important for ensuring that economic opportunity and prosperity is broadly shared. The Who Pays? report highlights that there is work to be done to make this a reality.

Uncategorized
Posted by : In Uncategorized

Despite the growing revenue challenge North Carolina faces, a new round of tax cuts went into effect with the start of the new year. While the growing revenue shortfall warrants immediate attention during the upcoming General Assembly legislative session that begins next week, inaction up to this point has already  dug a deeper hole as of January 1, 2015.

New personal income and corporate income tax rates are now in effect for 2015. The now-flat personal income tax rate dropped to 5.75 from 5.8 percent (the top marginal rate was 7.75 percent in 2013) and the corporate income tax rate dropped to 5 percent from 6 percent (it was 6.9 percent in 2013). These tax cuts will further reduce revenue for public investments and will largely benefit the wealthy and profitable corporation at the expense of low- and middle-income taxpayers.

The cost of the tax plan continues to grow higher than what state officials originally estimated. As of the end of the November, revenue collections are coming in $190 million below expectations. This loss is built on top of the already revised and anticipated revenue loss of $704 million due to the tax plan. Combined, this result in a nearly $900 million revenue loss for the state – much higher than the original $512 million cost estimate.

By the end of the fiscal year, BTC estimates a total revenue loss of around $1.1 billion Read More

NC Budget and Tax Center
Posted by : 2 Comments In NC Budget and Tax Center

In 2015, many conservative state lawmakers across the country are retreating from the long-held belief that cutting taxes will generate more revenue and spur economic growth. Kansas, Wisconsin, and, yes, North Carolina along with Arthur Laffer, in their efforts to put into practice the flawed theories of trickle-down economics, have created more problems than improvements, according to a recent Politico piece.

Rather than serve as a beacon of competitiveness in the South, North Carolina instead has become a cautionary tale for other states across the country that are considering tax cuts.

The evidence is mounting that tax-cutting experiments aren’t delivering on the promises made by trickle-down economic theory.

Read More

Commentary
Posted by : In Commentary

Be sure to check out Chris Fitzsimon’s “Monday Numbers” column this morning. It will quickly disabuse you of any notion that North Carolina’s hard turn to the political right has been helpful to the state’s key indicators of success. For instance:

1.1 billion—amount in dollars of the latest estimate of cost of the 2013 tax plan in the 2014-2015 fiscal year by the Institute on Taxation and Economic Policy (Ibid)

66—percentage of tax cut passed by the 2013 General Assembly that will go to the wealthiest one percent of North Carolinians (“Final tax plan pits at risk what makes North Carolina great,” N.C. Budget & Tax Center, August, 2013)

940,000—amount in dollars of annual income of wealthiest one percent of North Carolinians (Ibid)

14.5—percentage reduction in per pupil spending in North Carolina from 2007-2008 to 2014-2015 when adjusted for inflation (“Most States Still Funding Schools Less Than Before the Recession,” Center on Budget and Policy Priorities, October 16, 2014)

Read the entire column by clicking here.

12 3 Next

Support Our Work

NC Policy Watch on Twitter

Copyright 2015 | The Progressive Pulse | A Blog from NC Policy Watch