North Carolina Leftists like to claim that our state’s historic tax reform is a gift to the rich. The claim is false, as detailed below. For those who prefer to discuss policy based on fact, keep reading and you will understand why tax reform is helping millions of North Carolinians.
Taxpayers in every income category will save tens of millions of dollars because of state tax reforms enacted in North Carolina in 2013. Combining 2013 reforms with a 2011 sales-tax decline pushed by the Republican-led General Assembly, lower- and middle-income households will enjoy annual savings of $682 million, according to a new John Locke Foundation Spotlight report.
“It’s simply false to claim that recent tax changes in North Carolina are allowing the well-to-do to get their taxes reduced ‘on the backs of’ lower- and middle-income groups,” said Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “The average household in every income group from top to bottom is seeing its tax burden reduced from the 2013 tax reform package. Just as important, this new round of tax relief follows a 2011 state sales-tax rate reduction that overwhelmingly favored lower- and middle-income taxpayers.”
Cordato’s comments follow his review of a new study conducted for JLF by economists at Suffolk University’s Beacon Hill Institute. The Beacon Hill team examined impacts for all income groups of Republican-sponsored tax changes adopted since 2011.
“Much of today’s political debate focuses solely on the latest tax reform legislation, as if lawmakers made their decisions about those reforms in a vacuum,” Cordato said. “But that makes no sense. The tax reform law adopted in 2013 followed Republicans’ important decision in 2011 to reject Democrats’ efforts to keep a higher state sales tax rate in place. Taxpayers benefit greatly from both of these decisions from the Republican-led General Assembly.”
In 2015 households earning less than $25,000 a year, the lowest income category, will save a total of $79 million thanks to the 2013 legislation, Cordato said. Households earning less than $50,000 will see annual tax savings of $147 million.
“These savings result primarily from a state income tax rate cut to 5.75 percent and a large increase in the standard deduction,” Cordato said. “Benefits from these changes more than compensate for any increases in tax payments resulting from other pieces of the tax reform package.”
Gains for these low- and middle-income taxpayers are much greater when Beacon Hill Institute economists add the 2011 sales-tax decline into their calculations. “For the lowest-income earners, total tax savings in 2015 will be $157 million,” Cordato said. “Total tax savings climb to almost $350 million for households earning up to $50,000.”
Many of the most vocal critics of the 2013 tax reform legislation seemed less concerned about tax relief for low-income families in 2011, Cordato said. “Many of those on the left who claim falsely that lower-income people will not benefit from the latest tax reform are the same people who opposed the sales-tax decline two years earlier,” he said. “Because Republicans in the General Assembly rejected Democratic efforts to extend a higher sales-tax rate, households making less than $50,000 a year will enjoy annual tax savings of more than $200 million.”
And now you know why the Leftist claims are false, and why every North Carolinian should thank the majority of state legislators who voted for historic tax relief.
