Last year’s state tax reform lowered income tax rates for all working North Carolinians. The lower rates make North Carolina more competitive for jobs and stimulate economic growth.
Less than a year after the reform’s passage, however, several lawmakers drafted a bill to sabotage part of the tax cuts that drastically improved North Carolina’s business climate.
House Bill 1210, Rescind Income Tax Cut for Millionaires, would bring back a top tax rate of 7.75 percent for married couples earning more than $1 million per year, or single filers earning more than $600,000. Primary sponsors of the bill are Reps. Paul Luebke (D-Durham), Beverly Earle (D-Mecklenburg), Verla Insko (D-Orange), and Marvin Lucas (D-Cumberland), with several others signed on as co-sponsors.
Reinstating a top rate of 7.75 percent on the state’s personal income tax would once again give North Carolina the highest top income tax rate in the Southeast, and one of the highest in the nation. Why do these legislators want to go back to the failed policies of the past?
Supporters no doubt would say that the state should tax “millionaires” more in the name of “fairness.” But a substantial portion of small businesses file personal income tax returns, and this tax would harm them – and small businesses are major generators of new jobs.
Moreover, high-income earners have more options and are thus more mobile than middle- and lower-class income households. They can more easily move to another state. For instance, Maryland’s millionaire tax drove thousands of high-income people from the state, shrinking the tax base and creating added pressure to generate tax revenue from fewer taxpayers.
Furthermore, when the high-income earners leave a state, they take with them all the money they pump into the local economy, destroying jobs held by middle-and lower-income workers.
Taxing “millionaires” will not harm the millionaires. If they stay in North Carolina and pay the higher tax rate they will still be rich. They just may not expand their business, and they will have less money to spend and support the jobs of others. Or they will move to another state that allows them to keep more of what they earn. Either way, they’ll be fine. But ordinary workers and families will suffer.
The real victims of creating a new, higher income tax rate on high-income earners are the middle- and lower-income families that lose jobs and opportunity when North Carolina’s economy stumbles due to the loss of an important component of the state’s economy. Moreover, the higher tax rate likely shrinks the tax base, leaving the rest of us to shoulder a bigger share of the tax burden.
Because it would hurt the state’s economic competitiveness, leaving middle- and lower- class families worse off, HB 1210 is this week’s Bad Bill of the Week.