Transcript Document

UPDATED JULY 22, 2013: The tax deal that was reached by House and Senate represents a
compromise between bad and worse. The plan not only fails to fix the problems with our tax
code but also favors the wealthy over the middle-class and low-income people even more
while being unable to support the public services that North Carolinians value.
Tax Provision
Income Tax Structure
Income Tax Rate
Itemized Deductions
Final Tax Plan
The Better Choice
Flat
5.75% by 2015
Allows three itemized deductions: caps
mortgage interest deduction & property
taxes at combined $20K/ charitable
contributions not capped
Social Security Income
Exempt
Corporate Income Tax
Allowed to lower to 3% by 2017
Corporate Loopholes
Maintains most corporate deductions and
exemptions
Sales Tax Base
Expanded to some services
Local Food Tax
Maintained
Revenue Neutral for State?
Loses an estimated $661 million annually
Revenue Neutral for Local
Governments?
Slight increase in revenue
The personal income tax is the best way to ensure that
the tax code does not favor the wealthy. In order for
that to work though it must be structured so that as
income rises, the share of income paid towards the
tax increases with the wealthiest households paying
significantly more than the lowest income ones. The
best way to achieve a progressive personal income
tax is with graduated rates and refundable credits
(which are more effective at ensuring low- and
middle-income taxpayers benefit than deductions).
The corporate income tax is the best way to ensure
profitable corporations contribute towards the
maintenance of the public services from which they
benefit. Eliminating loopholes that only benefit a
small number of businesses in order to lower the tax
rate for all businesses would be a better choice.
Expansion of the sales tax base to services would better
align the tax system with the modern economy.
However, such expansion should not be used to pay
for cuts to the personal and corporate income
taxes. Rather, it should be accompanied with a rate
reduction and a larger state EITC to offset the impact
on low- and middle-income taxpayers of the sales
tax.
Revenue losses in the current environment will hurt the
state’s ability to recover from four years of drastic
cuts and will make it very difficult for the state to
keep up with a growing population and the rising
cost of delivering services.