fbpx

New analysis: A third of NC taxpayers won’t benefit from proposed tax refund plan

Proposal would also undermine preparations for next recession

North Carolina Senate and House leaders are moving forward with a flawed proposal to spend the majority of the state’s revenue over collections, more than $600 million, to issue tax refund checks of $125 per taxpayer ($250 for married couples).

Such a proposal undercuts the potential to address pressing needs in communities like school construction, hurricane rebuilding, shoring up the state’s Rainy Day Fund, and one-time investments that can improve the quality of life for children and families through quality education and health care.

It also flies in the face of prudent budgeting in the face of increasing concerns that the country and North Carolina could experience a recession in the near-term. Setting aside one-time money to minimize the potential hit to state revenues from a downturn is fiscally responsible.

Sending tax refunds to individuals won’t deliver the same economic boost as building schools or fixing our water infrastructure primarily because it won’t benefit those who need it most and are most likely to spend it. By design, the proposal is limited to tax returns that had positive income tax liability in 2018. That means that many taxpayers whose income is low or who receive various tax credits won’t receive a refund check.

New analysis from the Institute of Taxation and Economic Policy finds that 32 percent of taxpayers will not receive a tax refund check despite the fact that all North Carolinians pay state and local taxes each year.

Here’s why:

Some North Carolina taxpayers earn too little to file income taxes. Yet all North Carolinians pay sales and excise taxes. Low and middle income taxpayers pay a greater share of their annual income in sales and excise tax to our collective effort to strengthen community well-being.  The current tax refund proposal doesn’t account for the total tax load carried by North Carolina taxpayers.

Many taxpayers don’t have income tax liability due to the state’s high standard deduction. Overtime, the standard deduction—the amount of income you can earn before you have to start paying taxes—has been increased by policymakers. Increases in the standard deduction means that fewer people have income tax liability thus making fewer NC taxpayers eligible for the tax refund.

New analysis from the Institute on Taxation and Economic Policy finds that North Carolina taxpayers most in need of an income boost and those most likely to spend their refund are less likely to receive one. A full 70 percent of taxpayers in the bottom 40 percent of the distribution, those whose average income is below $36,000, will not receive a tax refund. At the same time, the top 20 percent of taxpayers receive 34 percent of the tax refunds.

It is time for a more serious conversation about our fiscal decisions and a return to the process of finalizing a budget that considers the full range of needs now and in the future.

Martine Aureline contributed to this post.

Load More Related Articles
Load More By Alexandra Sirota
Load More In NC Budget and Tax Center

Top Stories from NCPW

  • News
  • Commentary

Hawaii Sen. Brian Schatz is trying to cut a last minute deal that could bring tens… [...]

For the third year in a row, Decarcerate Now NC will host a vigil outside the… [...]

Tillis and Burr 'aye' votes help assure measure could not be filibustered WASHINGTON — The U.S.… [...]

Early voting in the U.S. Senate runoff got off to a busy start in Georgia, with… [...]

U.S. Marine vet from North Carolina: Congress should pass the Afghan Adjustment Act ASAP More than… [...]

It’s an age-old, chicken and egg discussion: Is it extant societal forces of exclusion, hatred and… [...]

The post At the corner of Partisan and Politics appeared first on NC Policy Watch. [...]

Maybe the change was an inevitable byproduct of our current charged and contentious era. Maybe it… [...]

REPUBLISHING TERMS

You may republish this article online or in print under our Creative Commons license. You may not edit or shorten the text, you must attribute the article to The Pulse and you must include the author’s name in your republication.

If you have any questions, please email [email protected]

License

Creative Commons License AttributionCreative Commons Attribution
New analysis: A third of NC taxpayers won’t benefit from proposed tax refund plan