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NC Budget and Tax Center

In any public policy debate, fact-based analysis is critical. As North Carolina continues to discuss a major overhaul to the state’s tax code, there are numerous analyses that allow lawmakers and the public to see how the Senate tax plan will impact taxpayers and the state.

Here are a few of the best resources and analysis:

In the face of such evidence, lawmakers should scrap the current tax plans and instead look for a way to reform the tax code without hurting middle-class and low-income families and local communities.

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It’s hard to know what to make of the news trickling out of the back rooms where House and Senate leaders are working on a tax cut deal. And yes, it’s about cutting taxes now, not reforming the tax code.

House Speaker Thom Tillis told the News & Observer that the two sides must “breach a philosophical divide,” which doesn’t sound like they are close to an agreement.

But the last line of a story by NC Capitol at WRAL.com says that Tillis and Senate President Pro Tem Phil Berger believe a deal could be done this week. That’s not much time for philosophical divide breaching.

There are also whispers in the legislative halls that some folks are pushing for a bare bones budget deal now and a special session on taxes in a few weeks.

Falling Behind in NC, NC Budget and Tax Center

The North Carolina House approved a budget last week that would chart the wrong path for North Carolina, according to a new brief released by the N.C. Budget & Tax Center. Similar to their colleagues in the Senate, the House leadership was intent on including tax cuts for the wealthy and profitable corporations in their budget at the expense of everyone else. The result is a budget that falls far short of meeting the needs of children, working families and communities across major budget areas.

In the House tax and budget plan, these tax cuts will cost $528.6 million in lost revenue over the next two years, with the cost ballooning to $651.1 million annually once the plan is fully implemented in the 2018 fiscal year. These figures represent the net tax changes of the House tax plan plus the repeal of the estate tax. Even worse, 95 percent of taxpayers, on average, would see their taxes go up in addition to cuts in vital public services under the House’s formula for “prosperity.” Read More

NC Budget and Tax Center

Policymakers are using the Tax Foundation’s flawed readings of academic literature to suggest that there is an economic consensus that their tax plans are the right path forward for North Carolina. The Center on Budget and Policy Priorities released a report yesterday that dug into the research and finds that no such consensus exists.

  • Numerous academic studies find no correlation between state tax levels and various measures of state economic performance (for example, income growth, firm formation, job creation and net household migration).
  • Other studies find that higher taxes are actually associated with better economic performance when they finance higher-quality education and better infrastructure needed and desired by businesses and households.
  • Some studies find that taxes have no effect in one time period and a negative effect in another, a positive effect on one measure of state economic performance and a negative effect on a different measure and/or different effects depending upon how tax levels are measured and the time frames under examination. But there is no consistency in the findings as to which time periods or measurements matter.
  • Nor are there consistent findings as to which taxes matter most for economic growth. Some studies find that state corporate income taxes don’t affect economic growth but state personal income taxes do, and others conclude precisely the opposite.
  • Finally, some studies conclude that while taxes’ effect on economic performance is statistically significant, the effect should be viewed as of such little economic significance that it should not be allowed to drive decisions as to whether taxes should be increased or cut.

To put it simply, there is no economic consensus that cutting taxes is a good strategy to grow the economy.

NC Budget and Tax Center

For those wonks out there following the details on how these tax plans are going to impact North Carolinians across the income distribution we have put together this short piece on the different tools that can be used to describe who pays. By far, the economic incidence model is the best way to estimate population-level impacts.  That is the model that the Budget & Tax Center has used.

While some have said that these tax plans benefit everyone based on what will happen to select individual taxpayers, it is important to be clear that some will see their taxes go up. The infographic below shows just a few examples of who those taxpayers could be.

infogrfk- House-Senate Plan_Layout 1

Most importantly, though, the debate over who will be impacted by tax changes should be grounded in the best available tools and an economic incidence model can give us the best information about how the population overall will fare after tax changes have been made.