by Sarah Curry
Director of Fiscal Policy Studies
As the General Assembly convenes today to start debate in the 2013 biennium, a leftist organization has published a report proclaiming our tax structure targets lower-income families to shoulder the majority of our tax burden. This could not be further from the truth. The report claims our state and local tax rates are regressive, yet its calculations include a federal offset variable, which is the only way to make that claim remotely plausible.
The federal offset should not be included for multiple reasons. Wealthier families pay higher federal income taxes than poorer families, even when accounting for itemized deductions, keeping their total tax burden in line with other income groups. In the 2012-2013 fiscal year the overall state budget is 34.9% financed by federal monies, primarily funded by the wealthy. Independent studies concluded the poorest 20% receive approximately $8 in government services for every $1 they pay in taxes, proving most government programs redistribute income from the wealthy to the poor.
The truth is that when looking ONLY at state and local taxes by quintile, there is not much difference for 80% of North Carolinians. These numbers vary slightly from the report; in checking basic arithmetic, errors were found in almost every column.
Lowest 20% – 9.8 percent
Second 20% – 9.5 percent
Third 20% – 9.6 percent
Fourth 20% – 9.7 percent
Highest 20% – 9.1 percent
The wealthy do have a slightly lower tax burden than the poor, seven-tenths of a percentage point, which is not overly regressive. Keep in mind that the top 20% are taxed vastly higher than lower- and middle-income families at the federal level. The left needs to present a more rational and appropriate argument. The claim of an overly regressive tax structure is just not true for North Carolina. Thankfully the new legislature and governor have promised to revise our tax code; I hope this will disassemble the left’s tax argument so we don’t have to keep hearing the same story with different titles.