Republicans in Raleigh Propose to Raise Taxes on Middle and Working Class North Carolinians

By Staff

 

The Republican Supermajority in Raleigh, led on this particular charge by US Senate hopeful Phil Berger (R-Dist26), has put forth a sweeping round of tax cuts for the already wealthy and corporations while shifting the burden to the middle and working classes in North Carolina. Cleverly engineered and sold as a “tax cut”- analysis by legislative researchers that shows it will be a net tax increase for everyone in NC making under $51,000.00 a year, this proposal seems to be yet another example of the Supermajority floating an extreme idea then getting a sigh of relief from everyone when what passes his “less extreme”, but no less damaging.

What Sen. Berger and the State Senate are proposing is to lower the personal income tax rate to a flat 4.5 percent, from a top bracket of 7.75 percent. It also cuts the corporate tax rate to 6 percent from 6.9 percent and adjusts how it is calculated. In order to raise new money to offset the cuts, the plan applies a 6.5 percent combined state and local sales tax to prescription drugs and more than 130 services that are currently tax-free, such as haircuts, lawn services, car repairs and professional help such as attorneys, accountants and doctors. The sales tax on food, currently a 2 percent local tax, is raised to the combined sales tax of 6.5 percent.

Most North Carolina taxpayers likely would see a tax increase after the plan is fully implemented, according to early long-term projections from legislative fiscal researchers who analyzed the potential legislation, not the tax break Senate Republican leaders would have you believe. Sources in the state legislature close to the Republican bill-writing process told CCD that dropping this more extreme proposal is part of the Supermajority’s play book. They roll out legislation that will not fully implement until AFTER the 2014 elections. If at that time the Republicans hold onto the Supermajority they now enjoy, many of the more extreme elements of their legislation would begin to kick in and would be augmented and further hardened by new legislation post 2014.

A North Carolina worker with a federal adjusted gross income that falls below $51,000 (The majority of North Carolinians) will pay an average $100 to $200 more in the 2017 tax year. Based on current tax brackets, 2.3 million North Carolina taxpayers would fit that category, according to the analysis done by the Raleigh News & Oberserver and the Charlotte Observer, while 1.8 million taxpayers could expect an average $300 to $3,000 tax cut that year.

Sen. Berger has already been waffling saying that the legislation is not yet finalized, but he did put an emphasis on the “fact” that the “vast majority,” or roughly two-thirds of taxpayers, would initially get a tax cut as a result of the legislation. Sen. Berger is right, for the first three years, most North Carolinians would pay less, the analysis showed. What Berger is not mentioning is the fact that after the 2014 election the majority of North Carolinians will see their income taxes go up while still paying more for the basics such as food and medicine.

The plan does include a temporary “working families” tax break for middle-income households. That goes away in 2016. The online calculator Senate leaders created to sell this plan only allows taxpayers to estimate their tax savings ends in year 2016 and doesn’t take into account what could amount to a tax increase for families making $30,000 to $75,000 the next year.

The Senate’s own projections show lower-income families and those with three or more children likely would get a tax increase, while taxpayers making more than the state’s $46,000 median household income, particularly those without children, would save money.

Far from the sweeping “tax reform” promised by the Supermajority this plan requires that the middle and working classes bear the burden of reform while seniors and the poor will be crushed under the boot of higher basic expenses and knee-capped government assistance programs.

Revenue raised under Berger’s plan would be done by forcing middle and working class families to pay more for food and haircuts. none of this revenue, however, would increase teacher pay or provide health care to people who can’t afford it. Berger’s tax scheme would mean more draconian budget cuts to schools, human services and environmental protections by reducing state revenues by a billion dollars- and those are Berger’s numbers.  All in all it will amount to an on average  $56,000.00 tax cut for North Carolina’s wealthiest residents.

 

The New & Observer’s Dwane Powell’s take on the plan.  Click on the image for a full size version at the N&O: