This is fascinating.
The meta-story surrounding the tax “reform” proposal — broadened, lower sales tax, sin tax hikes, income tax rate cuts — is 1000% wrong.
Real income tax rates are not being cut — not if they apply to AGI instead of the federal taxable income. And that is exactly what has been proposed.
Rough example: Current code, a family has a federal taxable income of $85,000, gets taxed at 7.75 for a state income tax bill of $6588.
Under the proposed “reform” that family has to add back in mortgage interest and medical expense deductions from their income, to name two big ones. Assume that adds $5000 to their reported income, a reasonable assumption for that income segment.
That would make for an AGI of $90,000 to be taxed at the proposed rate of 7.5, a 25 basis point reduction from the current rate. Follow?
This NC family’s new, reformed 21st century state income tax bill would be $6750, or $162 higher than their current bill.
Not reading that anywhere, are you?
Note that almost 70 percent of taxpayers in the above income bracket claim a mortgage interest deduction, about 50 percent of those in the $50K range do. About three-quarters of those making over $100K do. Given that, I have no idea how the GA claims that the income tax rate cuts would be net revenue losers for the state.
The vast majority of state taxpayers — especially the high earners with big liabilities — are gonna see their taxable income grow under the proposed racket, er, system.
Do the tea party folks know about this?
