NC Budget and Tax Center

A new year, another round of tax cuts for the wealthy, big companies

On January 1st, wealthy individuals and big corporations will get another break on their taxes, continuing a shift in the tax load to privilege the select few that leaders in the legislature have been pushing since 2013.  Sadly, this change will continue to ignore the public good and the need for investment to support a growing state.

The latest rate cuts will mean approximately $900 million less in annual revenue for the state, and legislative leaders did not account for the full cost of these tax cuts in their last budget.  It is therefore unclear how legislators will pay to educate every child, protect the health and well-being of families and steward the state’s natural and economic resources in the next year, let alone the future.  Given the growing unmet need in classrooms, crumbling school buildings and faltering infrastructure, failing to meet these pressing community needs will undermine the long-term prosperity and economic health of our state.

Let’s be clear about what these tax cuts are really about:  keeping in place rules of the game that build the wealth of the already wealthy.

These tax cuts aren’t going to boost the economy.  In 2018, North Carolina’s job growth not only faltered but failed to surpass its south eastern neighbors resulting in the failure of job opportunities to keep pace with those seeking jobs. The latest round of tax cuts come when the state’s wealthiest taxpayers and companies are already benefiting from federal tax cuts that passed in December 2017. As is evidenced by research into the more than 30-year experience of a tax-cut-for-the-rich approach, these tax cuts aren’t going to grow new jobs, spark new investments or address the long-run challenges and barriers that persist in our state and country’s economy.  These challenges—slow wage growth, high and concentrated poverty, exclusion and discrimination—require different policy responses that a focus on the already wealthy.

These tax cuts won’t make North Carolina more competitive.  A favorite talking point of legislative leadership is that the tax cuts in 2013 made the state more competitive in the hunt for multi-state and multi-national companies.  Never mind that our ranking on these indices were already high before the tax cuts largely due to our commitment to public and higher education or that these efforts didn’t seem to win the latest race to the bottom for Amazon.  North Carolina’s tax rates will now be among the lowest in the South Eastern region.

These tax cuts don’t put more money in the pockets of most North Carolinians.  The tax cuts since 2013 have disproportionately benefited the very wealthy.  Because of a focus on lower income tax rates—and the rates paid by few, big companies not small, home-grown ones—the tax cuts that North Carolina legislative leaders have pushed forward don’t mean everyday taxpayers have all that much more in their pockets on average.  In fact, many of the tax credits that specifically provided a break to working families were eliminated to pay for the rate cuts for the few.

These tax cuts have meant fewer dollars for priorities that can boost our well-being.  North Carolina legislators have failed to invest in the ongoing requirements of a sound, basic education and the evidence that early childhood education can improve lifetime outcomesMany other investments over the years have also been shortchanged to deliver the billions of dollars in tax cuts that go overwhelmingly to the wealthy: investments in public health have been cut, infrastructure, disaster preparedness and resiliency planning, health care and community economic development as well as affordable housing and environmental monitoring. To balance their budget and be able to afford the tax cuts for the wealthy, legislative leaders cut programs and services and used dollars we used to dedicate to things like school construction to pay for corporate income tax cuts.

Throughout this entire process, legislative leaders delayed phasing in tax cuts to disguise the true cost of the policy choices they were making, which is why wealthy people and rich corporations are set to get yet another round of tax breaks on January 1.

As North Carolina rings in the new year, it is time to resolve to end this failed tax cut experiment and return to smart public investments through a tax code that doesn’t ask more from nearly every taxpayer in the state while millionaires and big companies get a tax break year after year.

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