Archives

Recent news reports highlight that not all taxpayers will benefit from the tax plan signed into law by Gov. McCrory last year. While disputed, this has been a major talking point for proponents of the tax plan – that all taxpayers will benefit from the income tax rate cuts. The General Assembly’s Fiscal Research Division discredited this claim last month, however, noting that the tax plan creates winners and losers and that some taxpayers will pay more in income taxes.

News reports note that proponents are now backing away from this false claim. A fact check by the Associated Press (AP) concludes that while the state’s income tax rate goes down for every taxpayer, this does not mean all taxpayers will actually pay less in overall state taxes. In response to AP’s findings, Gov. McCrory’s office responded that the governor did not say “every” or “all” taxpayer(s) would see more money in their paychecks as a result of the tax plan. State budget director Art Pope points to a temporary one penny sales tax that expired two years ago to downplay the fact that some taxpayers – particularly low-income families with children – will pay more taxes under the tax plan. BTC’s analysis of the tax plan takes into account the expiration of the one penny sales tax as well as the decision by state policymakers to also let the surcharge on high-income taxpayers expire. Implications from the tax plan have been reported in other news outlets as well (see here, here and here). Read More

When the N.C. General Assembly passed a controversial overhaul to the state’s taxing system last year, the promise out of the mouths of Republican sponsors was that it would put more money back in taxpayers’ pockets.

But that’s not the case, the Associated Press found today in a factcheck its reporters conducted on the state’s new tax plan.

“It’s true that the state’s income tax rate is going down for every taxpayer in 2014,” the news agency wrote in an article published today. “But that does not mean all taxpayers will actually pay less to the state government over the coming year.”

That premise of lower tax bills, which has been echoed and repeated by Republican Gov. Pat McCrory, was scrutinized closely at the time of the bill’s passage and debate, with many calling foul on the claims including Cedric Johnson of the N.C. Justice Center’s Budget and Tax Center.

BTC data on N.C. tax increases under new plan

BTC data on N.C. tax increases under new plan

Johnson, in a report published in August, estimated that the bottom 80 percent of North Carolina residents will pay more in taxes under the new tax plan while needed services were slashed and the wealthiest in the state would see reductions in their tax bill. (Disclosure: N.C. Policy Watch is also a part of the N.C. Justice Center.)

The Associated Press took another look this week at the changes to the state’s tax code for 2014 and agreed that the tax breaks promised by lawmakers would not materialize for many people in the state.

Read More

The tax bill signed into law this year is fiscally irresponsible and bad for our state, but lawmakers could improve the situation by repealing part of the corporate income tax cut and paying for the rest by closing ineffective tax breaks that only benefit certain companies.

The corporate income tax cuts in the final tax plan are one of the biggest reasons why the state will have less revenue to invest in our roads, schools, and communities. The tax plan cuts the corporate income tax rate to 5 percent by 2015, from the current rate of 6.9 percent, and will reduce annual tax revenue by around $217.9 million in fiscal year 2014-2015 alone.

Meanwhile, the tax plan does little to rid the state’s tax code of costly and wasteful tax breaks that only help certain corporations or industries. Read More

The tax plan signed by Gov. McCrory includes huge tax cuts for profitable corporations that are unlikely to boost economic growth in the state and will reduce revenue for investment in our public schools, healthcare services for the elderly, and other important public investments.

By 2015, the corporate income tax rate is cut to 5 percent from the current rate of 6.9 percent and will reduce annual tax revenue by around $217.9 million in fiscal year 2014-2015. The corporate income tax rate is cut even further in future years if revenue meets a certain target – which is actually below existing revenue projections – and would reduce annual revenue by more than $423 million. These benefits will flow to less than 10 percent of North Carolina businesses. Read More

When the General Assembly’s Revenue Laws Committee met this morning to continue efforts to fix various problematic aspects of the tax plan signed into law by Gov. McCrory earlier this year, there was one key takeaway that shouldn’t have surprised anyone: contrary to the claim by proponents that all taxpayers would benefit from the income tax changes, not all taxpayers will receive a tax cut. 

When asked by the committee to confirm that all workers will benefit from the recent income tax changes, a General Assembly Research Division staffer informed the committee that there will be winners and losers and that some North Carolinians will see their state income taxes go up. The fact that the tax plan would ultimately produce winners and losers was known and acknowledged by the Research Division and legislators throughout the tax reform debate, the staffer noted.

And this is just taking into account changes made to the personal income tax, not the sales tax.

When ALL tax changes – income AND sales tax changes – are taken into account, middle and low income taxpayers who make less than $84,000 (the bottom 80 percent of taxpayers) on average will see their total state and local taxes increase, creating a tax code that favors the wealthy even more than before. This is the reality of the tax plan.

Hopefully this response by the General Assembly’s Research Division will convince proponents of the tax plan to finally acknowledge that not all taxpayers will receive a tax break under the plan.