North Carolina’s historic 2013 tax reform is once again under attack, and once again the critics are using misleading claims and false narratives to deceive the public.
Based on a flawed report produced by the NC Justice Center’s Budget & Tax Center, new ads falsely claim that most North Carolinians will pay more in taxes under the new, lower tax rates going into effect this year.
Interested observers should note that the Justice Center is one of the main organizations involved in Blueprint NC, the coalition of left-wing groups that last year gained notoriety for their strategy memo to “eviscerate” North Carolina’s conservative leadership and to “cripple their leaders.”
Last year, lawmakers enacted tax reform that, among other things, changed the old depression-era progressive tax code that topped out at 7.75 percent to a rate of 5.8 percent for all taxpayers effective in 2014, and dropping to 5.75 percent in 2015. The reform also reduced North Carolina’s corporate tax rate from 6.9 percent to five percent by next year. Both of these former rates were highest in the Southeast.
It is also important to recall that in 2011, lawmakers reduced the statewide sales tax rate by 17 percent over the veto of then-governor Bev Perdue. This last point is especially important to recall in light of attacks from the left claiming that recent tax reforms are not benefiting low-income households.
To correct the false narrative produced by the Budget & Tax Center and other leftists, a few facts are in order. For starters, the overwhelming majority of North Carolinians are now seeing the fruits of the lower state income tax rate as their 2014 paychecks show larger take-home pay and less state taxes withheld. This powerful first-hand account by millions of Tar Heels dramatically undercuts any credibility of the Budget & Tax Center’s claims. Simply put, on the recent NC tax reform the Budget & Tax Center is not to be believed.
Moreover, a significant survey of state government employees conducted recently confirms what millions of North Carolinians have already experienced themselves – take home pay is growing. As highlighted in a recent News & Observer article authored by state budget director Art Pope, “A large sample of over 75,000 state employees in all income ranges saw the average state tax withheld drop from 5.6 percent in 2013 to 4.5 percent in February and January. This is equivalent to 1.1 percent more in take-home pay.”
Similarly, research conducted by economists at the Beacon Hill Institute at Suffolk University in Boston and published by the John Locke Foundation shows significant tax savings for low-income households resulting from recent tax reform measures. Their recent report shows that, thanks to tax reform efforts in 2011 and 2013, “the state’s lowest income earners in 2015 will be saving $157 million,” and “Combined with lower middle-income households (those earning $25,000 to $50,000 annually) the savings for all households at the bottom end of North Carolina’s income scale comes to almost $350 million in 2015.”
From personal experience to academic research, the reality is the overwhelming majority of working North Carolinians are taking home larger paychecks.NOTHING WRITTEN here is to be construed as necessarily representing the views of the Civitas Institute, its board members, donors or supporters, nor should it be construed as an attempt to influence any election or legislative action. PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the Civitas Institute.