BTC REPORTS: The Case for North Carolina's Personal Income Tax

By Alexandra Forter Sirota
Budget & Tax Center Director
April 2012

EXECUTIVE SUMMARY

  • North Carolina’s personal income tax represents half of the revenue collected by the state each year (an estimated $10 billion in 2011).
  • Compared to every other tax in the state’s revenue system, the personal income tax is most aligned with ability to pay and grows the most with the economy, which makes it key to ensuring the long-term adequacy of the state’s revenue system.
  • North Carolina should continue to rely primarily on the progressive income tax. However, the state’s personal income has room for improvement to ensure adequate collections and an overall fairer state and local tax system. A strong first step toward reform would be broadening the personal income tax base to adjusted gross income (AGI) and creating an upper-income tax bracket.
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