Under New Tax Plan, Being Rich Rocks

taxes2Quality child care is seriously expensive, and the cost is about to go up. The new tax legislation that Governor McCrory signed just yesterday gets rid of the small state tax credit families receive for child and dependent care.

Working families will also lose the state Earned Income Tax Credit, which benefited some 900,000 families. The federal EITC was championed and implemented by President Ronald Reagan; an organization of corporate executives and university presidents known as the Committee for Economic Development said in 2000, “The EITC has become a powerful force in dramatically raising the employment of low-income women in recent years.” The state EITC was supposed to be a complement to the federal credit, providing a smaller but not insignificant break for families, and has only been law since 2007. With this legislation, it is no more.

The tax plan also hits seniors pretty hard. The Fiscal Research Division of the General Assembly – a non-partisan government body that crunches budgetary numbers of the state legislature – did some analysis of the new tax bill. It found that many older taxpayers who live on Social Security and pension income will see their income tax bills go up because they will lose the personal exemption and the deduction on their pensions. This is especially worrisome for older women, seeing as how “three out of five women over 65 have incomes that won’t cover their most basic daily needs,” according to the organization Wider Opportunities for Women.

The legislation also lowers the state income tax rate. Instead of the current three-tiered system, it creates a flat 5.8% rate, dropping it to 5.75% in 2015. The move will lower taxes a little for some middle-income families and a whole lot for upper-income people. Those with incomes of nearly $1 million would get a total tax cut of nearly $10,000, while a family of two adults and three children making $48,000 a year would actually have to pay $45 more under this plan, according to the NC Budget & Tax Center.

The tax plan will leave the state with $600 million less in revenue over the next two years and potentially $2.4 billion over five years. That should concern anyone who thinks North Carolina already is underinvesting in its public schools and universities, its roads and bridges, its healthcare system, or services for children, seniors, and people with disabilities.

As reported by NC Policy Watch, Rep. Rick Glazier of Fayetteville expressed concern that the tax changes will do nothing to help the state’s economy because the tax cuts for middle-income families aren’t big enough to boost spending, while wealthy families are likely to put their windfall into savings:

 “That’s my fear…. [I]n the end all we have is a tax cut, a tax shift and a dramatic reduction in revenue capacity to fund the infrastructure needs of the state. And we get not the best of all worlds; we get the worst possible outcome.”

 




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