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NC Budget and Tax Center

If you dressed a wolf in sheep’s clothing, would you then believe it was a sheep?

The leadership in the General Assembly and its allies hope you will. Proponents of the state’s new tax law are trying desperately to justify it, most recently by citing pennies in tax cuts for low- and middle-income North Carolina families in 2011, hoping you’ll ignore the harm the recently passed package will cause.

Most of the 2013 tax plan goes into effect this year, and for the vast majority of North Carolinians the picture is bleak.

The Budget and Tax Center’s analysis of the plan shows that when you consider all the tax changes and compare them to previous tax law, on average, people making under $84,000 a year – the bottom 80% of North Carolina taxpayers will see their taxes go up.

In a new analysis, proponents of the plan are touting the 2011 expiration of a temporary sales tax increase as evidence that low- and middle-income earners are better off.  They fail to note that lawmakers allowed a surcharge on high-income earners to expire (a tax cut of around $200 million) in 2011 too.  The expiration of the surcharge will actually generate an even greater tax cut for high-income taxpayers.

There are other key facts that get soft-pedaled in the Locke Foundation’s analysis. Read More

Uncategorized

The N.C. Education Lottery had an unusual sales pitch today, telling players that hitting it big in 2014 will mean less taxes and more winnings

In a tweet sent out this afternoon, the official state lottery Twitter account pointed out that the state’s new flat 5.8 percent income tax, which eliminated a progressive tax structure where the poorest pay a lower percentage of income taxes than those with higher incomes, is a bonus for lottery winners.

lotterytweet

The tweet links to two news releases put out by the state-run lottery that showcases how a Rocky Mount man with a $1 million Powerball ticket and a firefighter in the western part of the state are paying $7,000 to $12,000 less in income taxes in 2014 than they would have if they won in 2013.

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NC Budget and Tax Center

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

Uncategorized

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.

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NC Budget and Tax Center

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