NC Budget and Tax Center

Which tax plan will impact your life the most?

When Congress returns from its August recess next month, it faces the critical business of addressing the more than $5 trillion in tax packages signed under President Bush and President Obama set to expire in January 2013.

Before leaving town, the US House and the US Senate each managed to pass legislation extending these tax breaks, but these two plans treat the middle class very differently.  The Senate version extends tax cuts for 98% of Americans for one year, while eliminating tax breaks on incomes over $250,000—a provision which will reduce the Federal budget deficit by $1 trillion and only affects 2.2% of North Carolina’s residents.

The House-passed version, on the other hand, embodies very different priorities.  It keeps in place the tax cuts for incomes over $250,000 for another year, while eliminating tax credits for more than 13 million low- and middle-income working Americans. In effect, the House-passed plan finances big tax breaks for the wealthy by asking the middle class to contribute more.

These two plans could not be more different, and the Center for Tax Justice recently launched a new tax calculator to help Americans see for themselves just how dramatic these differences are. 

But an important aspect that isn’t captured in the calculator is the impact on our lives—beyond each of our own pocketbooks.  In fact, given the revenue that would be lost under the House-passed plan in one year alone, there would be fewer dollars to invest in our state’s infrastructure for business and everyone’s wellbeing, educating our children, and feeding housebound seniors for example.  The loss of these investments must be part of our calculation of how each proposal will impact our lives.


  1. Frank Burns

    August 17, 2012 at 3:28 pm

    Everybody should pay some federal taxes. It’s only fair. I support the elimination of the tax credits.

  2. gregflynn

    August 17, 2012 at 5:22 pm

  3. Doug

    August 18, 2012 at 8:28 am

    The upper 50% of taxpayers pay 97% of all taxes.

    The lower 50% of taxpayers pay just 3% of all taxes.

    The top 5% of taxpayers pay 57% of the entire total.

    Case closed !

  4. gregflynn

    August 18, 2012 at 9:44 am

    The case is far closed. The numbers quoted are not based on all taxes, only federal income tax. They do not include payroll tax or federal excise taxes. They are also based on Adjusted Gross Income which does not include deferred compensation and includes reductions for business expenses, IRA deductions, health savings accounts, moving expenses, self employment tax, self employment health insurance, alimony to name a few.

    Most of the people who don’t have a federal income tax obligation in a given year pay payroll tax and do pay a substantial amount of federal income tax over their lifetimes. 80% of working households pay more in payroll taxes than in federal income taxes. Lower income households pay a larger share of their incomes in federal excise taxes than middle and upper income households.

  5. gregflynn

    August 18, 2012 at 10:36 am

    The case is far from closed.

  6. Doug

    August 18, 2012 at 4:06 pm

    The case for payroll taxes is heard often, but makes no sense to me whatsoever.The payroll taxes are simply going to pay for social security and Medicare for each person who until recently received far more at retirement than they ever paid in when they were working. I think this is an estimated $ 750,000 for each person retiring today, Higher income individuals are paying in far more than they will ever receive from these programs because of the upper limits, and are paying in much more in state taxes and local taxes especially in the larger cities( New York City is 10%). Couple this with paying much more in local property taxes because the lower percentages often rent rather than buy, and now with the extra Obamacare taxes, you simply have no argument Greg. You’ll need to do a little more research on this one.

  7. gregflynn

    August 18, 2012 at 5:42 pm

    Here we go again, when caught in a lie, move the goalposts. You claimed “all taxes”. That claim was lie. Now you’ve segued to a rambling rant about state and local. New York City has a personal income tax by the way, has a variety of income streams and, many higher income people rent.

    Renters pay personal property tax directly and real estate property tax indirectly. Where do you think landlords get the money from? One difference is the landlord gets to deduct it, reducing the tax burden.

    Read the linked article: Misconceptions and Realities About Who Pays Taxes.


  8. Doug

    August 18, 2012 at 10:14 pm

    The original post was talking about income taxes, and my reply obviously referred to federal income taxes. You are the one Greg who brought up the other taxes paid, and I was simply pointing out the fallacies in your overall argument. You are famous for using certain facts to support an argument, but then only telling part of the story. In this case, the numbers clearly don’t support your argument. When 47% of American citizens pay no income taxes, it’s fairly easy even when mathematically challenged, to figure out who is paying the bulk of overall taxes.

  9. gregflynn

    August 18, 2012 at 11:55 pm

    Your comment said “all taxes”. It was a blatant lie. Furthermore, it is not a given that someone who pays no federal income tax does not pay state, and in some cases local income tax. NC State government is heavily dependent on income and sales tax. Local government is heavily dependent on property and sales tax. Our tax base should be even broader, but as it stands federal income tax is only one part of the puzzle. There are plenty of wealthy people gaming the system to minimize income tax liability. Mitt Romney comes to mind. The notion that lower income people are getting a free ride is patently absurd.

  10. Doug

    August 19, 2012 at 8:33 am

    It’s fairly obvious that you don’t understand much about taxes, so it’s very difficult to have an intelligent discussion here, especially with someone who likes to insult people.

  11. Frank Burns

    August 19, 2012 at 4:12 pm

    Greg, you are obfuscating your reply with feints and diversions. I stated my opinion that everybody should pay some federal income tax. As an aside, they should pay the other taxes too.

  12. Alex

    August 19, 2012 at 9:45 pm

    When you have no argument, obfuscation is the only alternative.

  13. gregflynn

    August 20, 2012 at 8:02 am

    Saying one thing and meaning another is obfuscation. Saying “all taxes” when you only mean “federal personal income tax” is obfuscation. Saying “federal taxes” when you only mean “federal personal income tax” is obfuscation. The tax calculator in the original post refers to “Combined personal income tax, Social Security tax and Medicare tax”. Federal personal income tax accounts for only about 40% of federal revenue.

    If in a system of income taxation income happened to be distributed evenly and every taxpayer paid the same rate it is a mathematical fact that in such a system the bottom 50% would pay 25% of tax while the top 50% would pay 75%. It will always look lobsided, especially when used as political rhetoric. To make the bottom 50% pay 50% of tax everyone would have to pay the same amount, regardless of income. In reality income distribution is not even and tax rates vary with income, so the political rhetoric becomes more pronounced.

    Regarding the suggestion that everyone should pay some federal income tax, I refer once again to the CBPP article:

    Some have implied or suggested that people who do not owe federal income tax are “freeloaders” who don’t have a “stake in the system,” and that making them pay federal income taxes would improve the tax code.

    Yet the vast majority of the people who owe no federal income taxes fall into one of three categories.

    Approximately 61 percent are working people who pay payroll taxes. As noted above, even the low-income households in this group pay substantial federal income taxes over time. The main options to force these people to pay federal income tax in years when their incomes are low include cutting the EITC or the Child Tax Credit, which would tend to reduce work incentives and increase child poverty and welfare use, and lowering the standard deduction or personal exemption, which could tax many low-income working families into, or deeper into, poverty.

    An additional 22 percent of people who did not pay federal income taxes in 2009 are people aged 65 or older who have modest incomes (and do not have earnings). The main option to make these individuals pay federal income tax would be to subject their Social Security benefits to taxation despite their limited income.

    The remaining 17 percent includes students, people with disabilities or illnesses, the long-term unemployed, and other people with very low taxable incomes. To make these people pay federal income taxes, policymakers would have to tax disability, veterans’, and similar benefits or make full-time students and the long-term jobless individuals borrow (or draw from any available savings) to pay taxes on their meager incomes.

    As Urban Institute analyst Elaine Maag has written of non-income taxpayers, “most are elderly, poor, or unemployed (including people who are too disabled to work). Whom, I wonder, should the tax man put on the block?”

  14. Frank Burns

    August 20, 2012 at 10:36 am

    Greg, just to clarify, income tax credits which I stated need to end, are related to federal income taxes only, not social security, medicare or other taxes, so no further interpretation by you is warranted. You provided more information than necessary to try and mask the point that half of the population pays no federal income taxes. By having a system where all citizens pay federal income taxes, everybody has skin in the game and become partners in vigilance against further increases in spending which would result in more taxes. It’s a issue of fairness by not having a group of people only receiving benefits and another group (middle class) only paying. Yes social security should be taxed as an income.

  15. Allan Freyer

    August 20, 2012 at 10:43 am

    Glad to see this post getting so much interest. One question for everyone:

    One-third of those who do not pay federal income tax are seniors on Social Security. If you want everyone to have “skin in the game,” you’re talking about these seniors, too. Do you support raising taxes on seniors?


  16. Frank Burns

    August 20, 2012 at 11:42 am

    Seniors are not taxed for Medicare and Social Security but they are taxed on retirement earnings for state and federal income taxes (which includes social security). Tax credits should be eliminated so that all citizens are taxed on income. All citizens should be taxed, no exceptions. If prisoners receive income during their incarceration, they should be taxed as well. Students should be taxed on any income as well. When one half of the population pays no federal income taxes due to their use of credits, then those citizens would have no objections to taxes being raised as they don’t have to pay any. So one half of the voters have representation but no taxes and the other half is represented but is taxed. There is no incentive for those who pay no taxes to elect representatives who are interested in reducing taxes. In other words the tax system creates a bias towards representatives from the left.

  17. Alex

    August 20, 2012 at 4:29 pm

    Seniors are taxed on Social Security benefits along with all pension benefits and investment returns if they go over a certain income limit. Because of Obama’s cheap dollar policies and keeping savings yields close to 0%, seniors have suffered losses of close to $200 Billion dollars on their savings which has been like a silent tax for the last 4years, and continues even today. Who got rich off this….Wall St. and the 1%, not the middle class.

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