Civitas Institute Study Demonstrates How Eliminating the Income Tax Will Put More Money in North Carolinians’ Pockets
RALEIGH – Today the Civitas Institute released a report recommending a tax reform plan that would replace North Carolina’s income tax with a consumption-based tax. The report—“More Jobs, Bigger Paychecks: A Pro-Growth Tax Reform for North Carolina”—demonstrates how North Carolina’s current income tax system harms the Tar Heel State’s economy and regional competitiveness, as well as how a consumption-based tax would reduce the overall tax burden on citizens, increase the rate of personal income growth, accelerate job creation, and improve the state’s economic strength.
This reform is currently being discussed by the state’s legislative leaders. The report was authored by Arduin, Laffer, & Moore Econometrics, in partnership with the Civitas Institute.
“Replacing the income tax with a consumption-based tax will restore North Carolina’s economic health and benefit all of our state’s citizens,” Civitas Institute President Francis DeLuca said. “Government data show that North Carolinians need more jobs and bigger paychecks, and that’s exactly what they will get with this proposal.”
North Carolina’s current income tax rate is higher than that of any other state in the region. Topping out at 7.75 percent, the income tax has led to an overall tax burden that is the 17th worst in the nation. This burden has also stymied the state’s personal income growth rate, which fell to the 26th fastest in the nation in the last decade after measuring 4th fastest in the previous twenty years.
The proposed consumption-based tax would replace North Carolina’s personal income tax, corporate income tax, and franchise tax. In order to keep the reform revenue neutral, the sales tax would expand to include all services currently taxed in at least one state, close current tax loopholes, increase the real estate conveyance fee, and implement a business license fee.
The report shows that states without personal incomes taxes averaged a 0.5 percent higher annual growth rate than other states between 2002 and 2011, while states without corporate income taxes grew a full 1 percent more per year. In North Carolina, the proposed tax reforms would increase the average annual rate of personal income growth by 0.38 percent to 0.66 percent more per year, according to the study.
“Had a consumption-based tax reform been implemented in 2000, North Carolina’s total personal income would be as much as $25 billion higher today, or about $6,000 to $10,400 for a family of four,” DeLuca said. “It would also have led to the creation of as many as 378,000 more jobs—a huge number for a state with 9.3 percent unemployment.”
To access the study, click here: http://www.nccivitas.org/2012/more-jobs-bigger-paychecks/
For the study’s executive summary only, click here: http://noincometaxnc.org/files/mjbp-exec.pdf
For a policy brief summarizing the study, click here: http://noincometaxnc.org/files/mjbp-brief.pdf
DISCLAIMER: Members of the Civitas Institute’s Board of Directors, including Art Pope, are involved in Governor-elect Pat McCrory’s transition team. The release of this study in no way implies an endorsement by Pat McCrory or anybody on his transition team, nor by any members of the Civitas board.
For more information or to schedule an interview, please contact Civitas Policy Director Brian Balfour at firstname.lastname@example.org or (919)747-8050.
More information on the Civitas Institute is available at www.nccivitas.org, or contact Communications Director Jim Tynen at (919) 834-2099.