MEDIA RELEASE: Tax plan embraced by Senate shifts load to middle-class, poor North Carolinians

A new report finds that tax plan provides windfall to wealthiest 20 percent of tax payers

RALEIGH (January 23, 2013) – North Carolina policymakers have embraced a new tax plan that would provide a significant windfall to the wealthiest 20 percent of state taxpayers, a new report finds, while requiring low- and middle-income households to pay more.

A study by a consulting firm chaired by Arthur Laffer, whose economic theories have been discredited by mainstream economists, addresses the false claim that taxes are the main barrier to job creation and economic growth. Commissioned by the Civitas Institute, the study says that tax cuts for businesses and high-income individuals will result in significant economic growth and hundreds of thousands of new jobs. Yet according to a new report from the Budget & Tax Center, a project of the NC Justice Center, the study’s tax plan – which has been embraced by our state leaders – fails in crucial ways.

The plan is designed to raise no more revenue than the state does currently, meaning North Carolina would be unable to make adequate investments in education, transportation and other foundations of a strong economy, the BTC report said. It fails to raise enough revenue for both North Carolina’s current and future needs.

The new tax plan is most generous to the wealthiest North Carolinians while raising taxes on middle-income households, the BTC report said. If implemented, a family earning $24,000 a year would see its taxes rise by $500 under the new tax plan, while one earning $1 million would get a $41,000 break. The wealthiest 20 percent of taxpayers will receive a significant tax cut – a cut paid for by shifting the tax load to 60 percent of the state’s taxpayers, primarily middle class and low-income households.

In addition, the new tax plan’s structure threatens the state’s ability to respond to changing economic conditions. The tax plan would radically change the state’s tax system by eliminating the personal income, corporate income, and franchise tax, which represent a combined 65 percent of the state’s revenue and generate $12 billion in revenue for North Carolina schools, roads, and other public priorities. The revenue loss would be replaced via a higher sales tax that would cover more goods and services, a business license fee and a real estate transaction fee.

“The underlying theory of this proposal, that income taxes are a barrier to economic growth, is wrong,” said Alexandra Forter Sirota, director of the Budget & Tax Center. “Tax cuts have not generated improved economic performance in the states where they have been implemented.”

A sound tax system allows North Carolina to invest in schools, roads, public safety, and other public structures that build a foundation for economic growth, the report said. Yet the Civitas/Laffer plan does the opposite by benefiting high-income individuals and locking in a revenue level that fails to meet our needs now and in the future.

“A much better option than the Civitas/Laffer plan would be true tax reform that will help promote a brighter future for all North Carolinians,” Sirota said.

The full report is available at this link.

FOR MORE INFORMATION CONTACT: Alexandra Sirota, 919.861.1468,; Jeff Shaw, Director of Communications,, 503.551.3615 (cell).