Local Politics

Who's affected by income tax surcharge?

Posted July 31, 2009 3:55 p.m. EDT
Updated July 31, 2009 6:07 p.m. EDT

— Lawmakers say the proposed income tax surcharge that they have included in this year's budget plan wouldn't affect 87 percent of North Carolina taxpayers, but who would have to pay it?

The extra charge is based on taxable income in North Carolina – the income after all exemptions and deductions are figured in on the annual D-400 tax form. Individuals whose taxable income is less than $60,000 and couples whose taxable income is less than $100,000 wouldn't be affected by the proposed surcharge.

Individuals whose taxable income is between $60,000 and $150,000 and couples whose taxable income is between $100,000 and $250,000 would have to pay a 2 percent surcharge under the plan. Individuals and couples with taxable incomes above $150,000 and $250,000, respectively, would face a 3 percent surcharge.

The surcharge would be calculated on total tax liability, including withholding taxes that have been paid throughout the year and any quarterly estimated tax payments that have been made.

For example, an individual with a taxable income of $70,000 who owes $4,900 in state income taxes would have to pay an extra $98 for the 2 percent surcharge. If the taxpayer had already had more than that withheld from his or her paychecks throughout the year, the surcharge would mean a smaller tax refund.

All businesses would have to pay a 3 percent surcharge on their annual tax liability, regardless of their revenue or profitability.

Lawmakers say the surcharge would raise $210 million toward erasing a projected $4.6 billion deficit. It and a one-cent increase to the sales tax rate that lawmakers have also proposed would end after two years.