June 14, 2013

North Carolina Budget & Tax Center: First Comprehensive Tax Legislation Would Not Protect Low- and Middle-Income Taxpayers from Tax Increases

ITEP Work in Action

80 percent of taxpayers would see slightly higher taxes under the first comprehensive tax legislation introduced this legislative session, while the top 1 percent of earners would get a tax cut.
The proposal threatens to erode resources for schools, health care and other services North Carolina needs to be economically competitive.
The proposal (Senate Bill 394) would create a flat personal income tax rate of 6 percent, but include a zero percent tax bracket for the first $11,000 of income. It would eliminate some deductions and loopholes, cut the corporate income tax rate to 6 percent, extend the sales tax to services and lower the rate from 4.75 to 4.5 percent, and make changes to the state’s franchise tax.
Creating a flat personal income tax rate will not improve economic growth. It would also erode revenue over the long term.
A zero tax bracket is no substitute for a refundable Earned Income Tax Credit and this plan is insufficient to protect low-income taxpayers from the disproportionate impact they would feel from higher sales taxes.

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