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NC Budget and Tax Center

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

NC Budget and Tax Center

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.

NC Budget and Tax Center

Proponents continue to make the claim that all North Carolinians will benefit from changes in the tax plan signed by Governor McCrory earlier this year. The reality is that the tax plan includes costly income tax rate cuts and the elimination of credits and deductions that will mean 35 percent of taxpayers will pay more in income taxes. When ALL tax changes – income AND sales tax changes – are taken into account middle and low income taxpayers with income below $84,000 (the bottom 80 percent of taxpayers) on average will see their total state and local taxes increase, making the tax code even more upside down.

One of the particularly common refrains is that families will be protected because the standard deduction is doubled. However, for many, the doubling of the standard deduction is not sufficient to make up for the loss of the personal exemption, the refundable state Earned Income Tax Credit and other deductions and credits. 

In fact, the first dollar of income is taxed sooner than under current tax law. Read More

NC Budget and Tax Center

The tax plan signed into law by Gov. McCrory earlier this year has been lauded by proponents as a major accomplishment during the 2013 legislative session. The tax plan, which cuts the state’s corporate and personal income tax rates, makes changes to the sales tax, and includes other tax law changes, reduces revenue for public schools and other public investments by more than $500 million over the next two years. By 2018, the tax plan reduces annual revenue by more than $650 million.

By chalking the tax plan up as a win for all North Carolinians, proponents fail to acknowledge the reality of fewer dollars for public investments and that the plan produces winners and losers. The tax plan does not represent a path toward shared prosperity for all North Carolinians, as BTC’s highlights in its analysis of the tax plan. Under the tax plan, taxpayers earning less than $84,000 a year, on average, will see their taxes increase and more than 65 percent of the net tax cut will flow to the top 1 percent of income earners in the state. 

Here are examples of taxpayers in North Carolina who are likely to see their total tax bill go up as a result of this plan. Read More

NC Budget and Tax Center

Businesses in North Carolina have been instructed by the state Department of Revenue to have their employees complete a new NC-4 tax form and workers and employers may be unclear as to why this is required. The simple answer is that the tax plan signed into law by Gov. McCrory means taxpayers will be paying more or less in NC personal income taxes starting next year.

Employers in the state are required by law to withhold a portion of their employees’ wages, typically each pay period, for NC personal income taxes and the NC-4 form helps employers estimate the amount of taxes to withhold. The new NC-4 form attempts to ensure that no employee is stuck at the end of the year owing a lot in NC personal income taxes or is owed a large refund by the state as a result of employers continuing to withhold NC personal income taxes based on 2013 tax laws. Read More