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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

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From his inaugural State of the State speech to interviews just a few weeks ago, NC Governor Pat McCrory has repeatedly proclaimed the critical importance of any tax reform in North Carolina being “revenue neutral.”  Indeed, in the State of the State speech he emphasized the need to protect NC’s vital services – like health care – in any reform.  McCrory is now presented with tax reform plans from the NC House and Senate that far from being “revenue neutral” cut literally billions of dollars from NC’s state budget over the next few years.  How will he react to this challenge to one of his bedrock principles on tax reform?

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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

NC Budget and Tax Center

The Senate’s historically unprecedented $1 billion-a-year tax cut passed out of the Finance Committee yesterday, moving steep reductions in personal income tax rates and outright elimination of the corporate income tax one step closer to becoming law.  While legislative leaders spoke glowingly about reducing North Carolina’s income tax rates to below those in other southeastern states, they remained conspicuously silent on how those other states have dealt with keeping their own income taxes so low–by increasing property taxes or sales taxes (or both).

This raises an important question—will North Carolina’s state income tax cuts simply lead to higher property taxes and sales taxes?

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NC Budget and Tax Center

One of the most eye-popping parts of the Senate tax reform plan is the proposed elimination of the state’s Corporate Income Tax, for a cost of $1 billion in foregone revenue each year.  Although Senate leaders have expressed high hopes for the economic benefits of this tax cut, they are likely to be disappointed—corporate tax cuts have repeatedly been proved to be a poor strategy for boosting the economy.

Perhaps the biggest reason for this failure is that only a small fraction of the additional income given to these corporations through tax cuts is spent within the state giving the tax cut.  And if North Carolina acts like the rest of the economy, then corporations will put just 10% of this tax cut back into North Carolina. The remaining 90% will be distributed to shareholder across the globe, or invested in other states and nations.

So why will North Carolina receive just 10% of the benefits of scrapping the corporate income tax?  Follow us below the fold to find out.

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