April 15 provides soapbox for backers, critics of NC tax overhaul

Posted April 15, 2014

— On the day that has become synonymous with taxes, Gov. Pat McCrory promoted the changes to North Carolina's tax code that lawmakers approved last year, saying they are already helping state taxpayers.

Critics of the tax reform effort disputed McCrory's premise, however, arguing that the overhaul will cost the people who can least afford it the most.

"For the first time in eight years, North Carolina’s unemployment rate has dropped below the national average, and I think, with tax reform, we’re going to continue to get better and better results,” McCrory said.

Lawmakers replaced the three-tiered income tax structure with a flat 5.8 percent tax on everyone. For a family making $21,000 a year, it's a 0.2 percent tax cut, compared with a 1.95 percent cut – almost 10 times larger – for a family making more than $100,000.

"We're leaving a little extra money in everyone's paycheck," McCrory said, "so they can buy save and invest more for their families."

Come next April 15, taxpayers will see fewer deductions and credits. As part of the overhaul, lawmakers didn't extend the Earned Income Tax Credit, which helped more than 900,000 low-income households last year, and they cut the child care deduction and the annual sales tax holidays for back-to-school shopping and purchasing energy-efficient appliances.

Alexandra Sirota, director of the left-leaning North Carolina Budget & Tax Center, said the average family will pay more overall under the new system.

"What they passed last year amounts to a tax shift," Sirota said. "High-income folks (and) profitable corporations will see their taxes go down on average, and the low- and middle-income working families in North Carolina will see their taxes go up."

According to nonpartisan experts, a married couple with two children making $250,000 a year will get a tax cut of $2,318. A similar-size family making $20,000 a year will go from getting a $222 refund to owing $40.

John Hood, president of the conservative John Locke Foundation, agrees that North Carolina's tax reform has created winners and losers, but his analysis finds more winners.

"The tax bill enacted last year will reduce the tax burden for most North Carolina families and businesses while increasing job creation, entrepreneurship and economic growth in our state," Hood said.

He called Sirota's numbers "mathematically impossible," saying a majority of studies show higher overall tax burdens were associated with lower economic performance.

"Wealthy North Carolinians will also receive tax cuts as well, but not at the expense of low- and moderate-income households," he said.

Dave Ribar, a professor of economics at the University of North Carolina at Greensboro, dismissed claims that the tax reforms are helping employment rates in the state, noting that 64,000 people left the labor force in North Carolina last year.

"The big drop that we’ve seen in unemployment has come mostly from people who’ve just given up looking," Ribar said.

McCrory said it will take time to see which side is right, but he contends that tax reform will help the state economy. Lawmakers also cut the corporate tax rate by nearly 1 percent, and the governor said such reforms are already helping to attract new businesses to the state.

"We couldn't keep the status quo of an existing tax system which was not competitive with the rest of the United States, the rest of the world, much less our neighbors in South Carolina, Tennessee and Virginia," he said. "That was unacceptable, so we had to give and take."


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  • Kenny Dunn Apr 16, 2014
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    Surely we all know this has been going on for a very long time and all parties have had a hand in the problems. It seems we do differ on just what the solutions should be - that's all. I think there has to be compromise on all sides. Otherwise there is no solution other than one form of bankruptcy or another which most would not like to see (other than the *very* wealthy who always find a way to benefit).

  • notexactly Apr 16, 2014

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    I did. I sold my business at its peak like most owners do. I employed 15+ people for over 12 years. I don't think the poor should pay more at all. I said that they should not get as much as someone who already pays the majority of the tax.
    The entitlements are very different than roads and social security. See everyone gets to use that. Well unless you die, then your social security goes to someone else who could be a fraud anyway. You are grouping all the gov spends into the same pot and it is not that way. And your comments are always directed at the reps and the dems are getting the same tax breaks also. You make it sound like it is all the gops doing and that is wrong

  • notexactly Apr 16, 2014

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    your are so twisted it is sad. So every rich person don't work? I know a total of 5 millionaires and they all work or worked 15/ 16 hours a day for sometimes 7 days a week. One has died and was worth 10mil. Made it on his own. Not inherited. The others ( 2 are in their 70s) still work 5 days a week . 2 are rather middle aged and are always working. Why do you hate success so much. What have you failed at to make you so bitter?

    And the (we) you ask about is the government you vote for. You seem to think that the dems play no part in tax breaks to these corps. I hope you are not that far in left field. the top 10 % pay 70% of the tax. How much should they have to pay in your world? How bout our crooked gov not spend and waste the money they do have. It already is a plenty. Like I said if they took all the rich peoples money the poor people you cry about would not all of a sudden become rich, and it still wouldn't be enough for the left

  • rduwxboy Apr 16, 2014

    Budget Shortfall will be the buzzword as the budget gets crafted for next year. The revenue surplus has dropped from almost 100K in January to 12K now and the governor is telling people to stop making copies and sharpening their pencils.

  • Kenny Dunn Apr 16, 2014
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    Well said. Thank you.

  • Smilester Apr 16, 2014

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    Actually the real problem is the entire system. It has been rigged since Ronald Reagan took office to kill the middle class. That's what trickle down economics does. It makes the top 2% incredibly rich & shrinks the middle class. The fact of the matter is the same people that would whine about redistribution of wealth in regards to social programs don't even seem to realize that the largest redistribution of wealth in human history has occurred in this country over the last 30 years due to Trickle Down economics. 2% of Americans control 85% of the wealth. Prior to Reaganomics that number for the top 2% was 60%. Republican tax policies via tax cuts & "reforms" just like these have absolutely killed the middle class. Now with last weeks Supreme Court ruling we now have the best government money can buy. The problem with Republican tax "reform" policies. These policies hurt small businesses & the middle class. They are what made America great.

  • goldenosprey Apr 16, 2014

    woodchipper, the state does not enable people to get rich? They do it all on their little lonesome? LOL!

    Then explain all the subsidies and tax breaks we give to oil companies, the subsidies to farms, the price and import controls on sugar, ethanol, Medicare part D, defense contracts spending billions we ought to use on people, not war, our Navy escorting oil tankers through the gulf, food stamps, medicaid, low traffic inlet dredging, dirt cheap and often unpaid grazing and extraction rights on public land, flights to rural airports... I'm gonna run out of characters.

    Do they not use our roads? Hire people educated by our schools, use our cops and fire depts to protect their stuff?

    Most rich people's income comes from passive income - that is, income that arrives at their door after sitting on their duff all day for being rich in the first place.

    A lot of people struggling to make ends meet are busting their humps too. Why should they subsidize tax breaks for the rich?

  • Kenny Dunn Apr 16, 2014
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    Regarding 'fair share' I would start with treating capital gains and dividends the same as wages. In every way. I've never fully understood why someone's hard earned wages are taxed differently than what are often very passive capital gains and dividends.

  • Ty Shrake Apr 16, 2014
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    "You assume I hate rich people, but I merely think they should pay their fair share for the state that enables them to acquire such wealth. " - GOLDENOSPREY

    The state doesn't "enable them" to increase their wealth. They increase their wealth by working hard. If it enabled THEM why isn't it enabling ANYONE ELSE in the state? Exactly HOW are these people "enabled".

    Most wealthy people bust their humps to become wealthy. You make it sound like they owe the state something. Apart from legal taxes they don't owe the state anything. Neither do you. Same rules for everyone.

    And please define "fair share". Is that a share that makes YOU happy? What is the exact number (percentage of income) that is "fair" and why is that the number?

  • Ty Shrake Apr 16, 2014
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    "The biggest freeloaders in this country are its largest corporations. They make record profits then they turn around and take the tax cuts & subsidies as well. Good deal for big business. Bad deal for everyone else." SMILESTER

    So is the real problem "corporations"? No, it isn't. Business and profits are a GOOD thing. They are only doing what the law allows. And who makes those laws? It is Washington DC that we should be storming, not the front doors of a Walmart store.