There’s another way to assess Gov. Roy Cooper’s claim that N.C. taxpayers with incomes of $1 million “or more” reap a tax break under the compromise state budget plan that’s 85 times larger than the tax break for a working family.
Rather than starting with the break for the taxpayer earning $1 million ($2,557 for the married couple filing jointly), we can start instead with the tax break earned by the working family. From there, we can calculate how much money a taxpayer would have to earn to get a tax break that’s 85 times as large.
From Tuesday’s column, we know that the combined impact of a lower tax rate (dropping from 5.499 percent to 5.25 percent) combined with a higher standard deduction (increasing from $17,500 to $20,000) for a married couple filing jointly leads to savings of $200 for a childless couple earning $45,000 a year. To be 85 times as large, a tax break would have to be worth $17,000.
How much would one have to earn to get a $17,000 tax cut from the compromise budget’s changes in the personal income tax system? Almost $6.8 million. It’s also worthwhile to note that the $6.8 million household still would pay a tax bill of $355,535. The household’s personal income tax burden would drop by less than 5 percent (compared to a 13 percent reduction in the burden for a $45,000 household).
And, despite getting a tax break 85 times as large as the working family, the tax bill for the $6.8 million household would still be 270 times as large as the tax bill for the $45,000 household.
It’s hard to picture a taxpayer with $6.8 million taking the standard deduction rather than itemizing. And one suspects that Gov. Cooper had something else in mind when he contended that high-income earners reap greater rewards than working families reap from the budget’s tax changes.
But it should be abundantly clear that the “85 times larger” claim cannot be applied solely to the changes in the personal income tax rate.
