• 54°

Against the tax cap: Consequences could be costly

NC Budget & Tax Center

Proponents claim that lowering the cap on the income tax rate in the Constitution is necessary to hold down spending and put more money in the pockets of North Carolina taxpayers. However, an analysis of these claims and the proposal to set the maximum income tax rate allowable in the state constitution finds that:

Millionaires are the primary beneficiaries when the income tax rate is not allowed to go above 7 percent. The top 1 percent of taxpayers receive more than half of the total next tax cut from a 7 percent maximum income tax rate when compared to what would be possible with a graduated rate structure with brackets on higher incomes.

Fewer dollars are available to make critical, transformative investments in our state. A graduated rate structure that taxes income above certain income thresholds at rates above 7 percent, like what was in place during the 2001-2006 period, would provide an estimated $2.4 billion in state revenue. Those dollars would allow North Carolina to get teacher pay to the national average and make investments in our children’s education by funding textbooks, classroom supplies, and technology.

Middle- and low-income taxpayers will see their tax load increase. Research has shown that tax limits do little to ensure that taxes are held down. Instead, policymakers often raise taxes such as sales and property taxes to meet identified needs in communities. Raising the $2.4 billion in revenue that would be available under a graduated rate structure through the sales tax — which asks more of low- and middle-income taxpayers — would require the sales tax rate to increase from 4.75 percent to 6.29 percent. Under a sales tax change, the poorest taxpayers would see a 0.9 percent change in their taxes as a percent of their income versus just a 0.1 percent for those at the top — while under a graduated income tax proposal, anyone making less than $60,000 would experience no tax change.

Reaching the full economic potential of the state is blocked when the state underinvests in opportunity for all and delivers tax cuts to the wealthy few. One of the state’s persistent economic challenges is that job growth has been uneven and barriers to opportunity remain, particularly for communities of color and rural places. These barriers are made worse and continue to compound over time when state investments are arbitrarily capped. By not ensuring that children from every background have access to a sound, basic education, North Carolina is missing the economic boost that is possible when every person in the state — regardless of race or ethnicity — is able to achieve their full potential.

Limits on state revenue will put pressure on local budgets and lead to increases in local taxes like the property tax. As local policymakers contend with fewer state dollars to support local needs, many counties will face greater difficulty in meeting local needs. The result will require local leaders to either cut services or raise property taxes. Since 2012-13, 74 counties have raised their property tax rates and many have also revalued properties in their local jurisdictions.

Comments

Business

With remote expansion, outsource provider FCR looks to become an ‘exceptional part’ of Rowan community

Local

City expects $1.5 million surplus in current budget, ability to raise some wages for police, public works

Education

Enochville Elementary to host farewell event May 1

High School

High school softball: Carson beats West in a wild one

College

Seahawks QB Russell Wilson will speak at NC State graduation

High School

Wonders, Trojans facing off Monday on Cannon Ballers’ field

Local

City approves two apartment developments, more than 160 new units

Nation/World

Crowds react with joy, wariness to verdict in Floyd’s death

News

Bill seeks to end pistol purchase permits from NC sheriffs

Coronavirus

Rowan County sees 300th death attributed to COVID-19

News

Chauvin convicted on all counts in George Floyd’s death

Local

Top North Carolina House finance chair, Rowan representative stripped of position

Crime

One charged, another hospitalized in fight between cousins

Local

Bell Tower Green renamed to honor Stanbacks; Nancy Stanback receives key to city

Business

Commissioners green light additional houses at Cherry Treesort in China Grove

Education

A.L. Brown will hold in-person, outdoor graduation

Local

Granite Quarry awards FEMA contract for Granite Lake Park

Local

City to vote on apartment developments, final phases of Grants Creek Greenway project

High School

High school football: North receiver McArthur a rising star

Columnists

Carl Blankenship: Pollen and prejudice make their return

News

Harris pitches $2.3T spending plan on trip to North Carolina

Nation/World

Murder case against ex-cop in Floyd’s death goes to the jury

Crime

Sheriff’s office: Man takes deputies on chase with stolen moped

Coronavirus

Afternoon, evening COVID-19 vaccination clinic planned Thursday