Raleigh (Aug. 23, 2016) — Tax changes passed in the 2016 legislative session reduced the income tax rate and increased reliance on the sales tax in North Carolina. This continued flawed approach to taxation that policymakers have followed since 2013 has proven disastrous to other states’ fiscal and economic outlook, according to the latest BTC Brief from the North Carolina Budget & Tax Center (BTC). This plan fails to meet North Carolina’s high standards of fiscal responsibility and will fail to put the state in a competitive position with our neighbors or the rest of the nation, as BTC Director Alexandra F. Sirota outlines in “The Road to Nowhere Good for N.C.”

“North Carolina General Assembly leaders have made clear that eliminating the income tax is their end goal, which should be of great concern,” says Sirota. “Each step toward zero income tax further skews the state’s upside-down tax system and further challenges our ability to make public investments that support thriving communities across the state.”

Key Findings: 

  • The end goal of no income tax will hurt North Carolina’s economy. This would eliminate nearly 60 percent —more than $12 billion—of the state’s General Fund tax dollars. Policymakers will either have to eliminate more than half of their investments in public schools, health care, economic development and public safety, or raise more funds through the sales tax. Or both.
  • The tax code continues to deliver the greatest breaks to the top 1 percent. The top 1 percent has received on net, an average tax cut of $15,500. People earning $44,000 a year received a tax cut of $167, while people who earn less than $12,000 saw their taxes go up $10.
  • The tax plan is a big revenue loser. Revenue loss from tax cuts passed since 2013 equates to nearly 10 percent of total General Fund spending for the 2017 fiscal year. The $2 billion in annual revenue lost when all the tax changes are in place will be equivalent to North Carolina’s entire Commerce and Community College budget. 
  • The standard deduction is costly and fails to target low-wage workers. The roughly $120 income tax cut for the majority of taxpayers is barely noticeable for millionaires but not really enough to help workers who are struggling with the lack of wage growth and the higher cost of living. 

The tax code as it stands today not only does not address North Carolina’s economic challenges, but instead undercuts the foundations of what have proven to be economy-boosting public investments.  

Read more in the BTC Brief, “The Road to Nowhere Good for N.C.: Latest Tax Changes That Aim for Zero Income Tax Continue to Benefit the Wealthy at the Expense of Working North Carolinians and Communities.”

FOR MORE INFORMATION, CONTACT Alexandra F. Sirota, Budget & Tax Director, (919) 856-1468, alexandra@ncjustice.org; or Mel Umbarger, Senior Communications Specialist, (919) 856-2567 or mel@ncjustice.org