If you’re like me, you’re in the middle of the tax filing process. Taxes are necessary to fund core services we can’t reasonably be expected to provide on our own. You notice I write “core” services. That, of course, is where the debate begins about the role of government, and it is where the John Locke Foundation plays a significant role in defending freedom and pushing back against government involvement in areas that fall outside “core” services. I hope you’ll think about the concept of “core” services as you focus on your personal tax burden for 2013. And I hope you’ll realize that the fiscally conservative majority in the General Assembly has taken a big step on our behalf by passing tax reform AND tax reduction. John Hood explains why the legislative majority deserves our thanks for standing up for freedom and families.
North Carolina’s 2013 tax package fits this definition of successful tax reform. A new study of its effects, published by the John Locke Foundation with the assistance of the Massachusetts-based Beacon Hill Institute, shows thatthe average household at every income level will pay lower state taxes in 2014 and beyond than they would otherwise have paid.
The total tax burden will drop by about $150 million a year for households with incomes below $50,000. For those with incomes between $50,000 and $100,000, the net tax savings will approach $140 million a year. Upper-middle-income and wealthy taxpayers will get significant tax relief, as well, reflecting the fact that they were previously paying the highest marginal income tax rate, 7.75 percent, which will drop two full points to the new flat rate of 5.75 percent.
This is only the beginning of the story, however. For one thing, 2013 wasn’t the first year of spirited debate about state taxes. Two years earlier, when Democrat Bev Perdue was governor and Republicans had just taken over the General Assembly, Democrats proposed to extend most or all of a one-cent sales tax they had originally enacted in 2009 as “temporary.” Republicans refused. If Perdue and the Democrats had gotten their way, poor and middle-class North Carolinians would be shouldering as much as $400 million a year in higher sales taxes today. Where were liberal journalists and activists in 2011? In favor of the Democratic plan, of course.
Anyone familiar with the past three decades North Carolina tax policy would know that Democrats have repeatedly raised state and local sales tax rates while Republicans have opposed those hikes. To claim otherwise is to reveal either ignorance or dishonesty.
Another reason why the nearly $300 million in net tax cuts for poor and middle-income North Carolinians in the 2013 tax package is only the beginning of the story is that it doesn’t include the dynamic effect on the state’s economy. Empirical research suggests that the lower tax rates will make North Carolina a more attractive place to invest, start businesses, and create jobs over the next few years.
McCrory and the legislature didn’t tax average folks more to fund tax cuts for the rich. They crafted a tax reform with broad fiscal and economic benefits for the vast majority of North Carolinians.
