2013 tax changes now showing up on NC returns

While Republicans say most taxpayers should end up paying less, Democrats contend most of the break is going to wealthy people and corporations.

"Most people are going to benefit from it," said Sen. Chad Barefoot, R-Wake. "The personal income tax reduction applies to every working person out there that is taxed on their personal income, and they've seen those rates fall substantially."

But Sen. Mike Woodard, D-Durham, said he's heard from people who say their tax bill has gone up this year.

"People feel duped by this governor and the legislature. They were promised the largest tax cut in history. Instead, they're paying more," Woodard said.

The individual income tax rate has changed from a tiered system ranging from 6 to 7.75 percent to a flat 5.8 percent. Under the flat tax, less has been withheld from paychecks since the beginning of last year, so the more someone earns, the more the new structure saves them.

The standard deduction also is at least double what it used to be for all North Carolina taxpayers, so everyone is paying tax on less of their income. Unless, that is, they were eligible for one of the many itemized deductions lawmakers eliminated, such as tax credits for child care and college savings or deductions for medical expenses, retirement income and small-business income. If those deductions would have totaled more than the new standard deduction for a specific household, their state tax bill probably went up.

Democrats say the changes disproportionately hurt low-income people to help the wealthy.

"Gov. (Pat) McCrory and the Republican legislature are costing them dearly, and they deserve to know who was prioritized ahead of them," said Rep. Susan Fisher, D-Buncombe.

Barefoot acknowledges there are winners and losers, but he said the tax changes are good for the state economy, which benefits everyone.

"I think what we need to keep in mind is the big picture, and the big picture is North Carolina’s had one of the fastest economic recoveries in the country, and part of that is due in fact to the changes we made in our tax code," he said. "The purpose was to make North Carolina competitive again with our surrounding states, which we are now, and what we’ve seen since we’ve done that, we’ve seen some of the fastest job growth in the nation."