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In his press conference yesterday, North Carolina House Speaker Thom Tillis reiterated his desire to eliminate the state’s corporate income tax, expressing his earnest (but misguided) belief that abolishing the tax will ensure stronger job creation across the state. This belief is misguided because it rests on a fundamentally flawed assumption—that corporations will always reinvest the savings they get from the tax repeal into creating new jobs or paying existing workers higher wages inside North Carolina.

In reality, there is no guarantee that multinational corporations with locations and subsidiaries across the entire world will take their North Carolina state tax cut and reinvest it in their North Carolina operation. In fact, if we look at recent national corporate investment patterns, there’s actually no guarantee that these corporations will reinvest additional income in job creation (or higher wages) at all.  

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Legislative leaders are seeking to further reduce and eliminate North Carolina’s personal income tax, despite the fact that such a plan would make the state’s tax system more regressive by shifting the tax load onto those least able to afford it. Broadly speaking, this tax shift would have huge implications for North Carolina’s low- and middle-income residents, as a new NC Budget and Tax Center report shows.

But as Dave Ribar, an economist at UNCG, points out in his blog Applied Rationality, older adults would be disproportionately impacted by the Civitas/Laffer/Senate plan that calls for elimination of the state’s personal income tax.

Tax policies that benefit older adults by reducing the taxes that they pay—such as the exemption of social security income, partial exemption of pension income, and higher standard deduction—would go away with the elimination of the state personal income tax. Spending patterns are also unique for the average retiree, argues Ribar. An increased reliance on the regressive sales tax would hit retirees harder because they spend a greater share of their retirement income on consumption items—particularly items such as food and prescriptions that would be newly taxed at the state level under this plan. Read More