Carolina Journal: Study Shows 2013 N.C. Tax Reforms to Benefit Every Income Group
Study Shows 2013 N.C. Tax Reforms to Benefit Every Income Group
Latest changes follow legislators’ progressive 2011 sales-tax rate reduction
By CJ Staff
RALEIGH — Taxpayers in every income category will save tens of millions of dollars because of state tax reforms enacted in North Carolina in 2013. Combining 2013 reforms with a 2011 sales-tax decline pushed by the Republican-led General Assembly, lower- and middle-income households will enjoy annual savings of $682 million, according to a new John Locke Foundation Spotlight report.
“It’s simply false to claim that recent tax changes in North Carolina are allowing the well-to-do to get their taxes reduced ‘on the backs of’ lower- and middle-income groups,” said Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “The average household in every income group from top to bottom is seeing its tax burden reduced from the 2013 tax reform package. Just as important, this new round of tax relief follows a 2011 state sales-tax rate reduction that overwhelmingly favored lower- and middle-income taxpayers.”
Cordato’s comments follow his review of a new study conducted for JLF by economists at Suffolk University’s Beacon Hill Institute. The Beacon Hill team examined impacts for all income groups of Republican-sponsored tax changes adopted since 2011.
“Much of today’s political debate focuses solely on the latest tax reform legislation, as if lawmakers made their decisions about those reforms in a vacuum,” Cordato said. “But that makes no sense. The tax reform law adopted in 2013 followed Republicans’ important decision in 2011 to reject Democrats’ efforts to keep a higher state sales tax rate in place. Taxpayers benefit greatly from both of these decisions from the Republican-led General Assembly.”
In 2015 households earning less than $25,000 a year, the lowest income category, will save a total of $79 million thanks to the 2013 legislation, Cordato said. Households earning less than $50,000 will see annual tax savings of $147 million.
“These savings result primarily from a state income tax rate cut to 5.75 percent and a large increase in the standard deduction,” Cordato said. “Benefits from these changes more than compensate for any increases in tax payments resulting from other pieces of the tax reform package.”
Gains for these low- and middle-income taxpayers are much greater when Beacon Hill Institute economists add the 2011 sales-tax decline into their calculations. “For the lowest-income earners, total tax savings in 2015 will be $157 million,” Cordato said. “Total tax savings climb to almost $350 million for households earning up to $50,000.” Read more…