>>The new year rolled in a sweeping set of changes to North Carolina’s tax code. Although the governor says the new tax laws will equalize the state’s tax burden, many criticize the plan, saying the poor and middle class are unfairly shouldering the load. Over the next few weeks, Women AdvaNCe will take a closer look at how each of these changes will affect women and families in North Carolina. But first, here’s an overview of 2014’s new rules.
Income tax rate:>> All North Carolinians will pay 5.8% income tax, as opposed to a sliding scale based on income. Previously the state’s wealthiest families paid 7.5%, middle income earners paid 7% and low income workers paid 6%. Gov. McCrory praised this cut, saying that reduced across-the-board tax rates will stimulate business. The legislature’s Fiscal Research Division says a family of four making $250,000 a year will see a $2,000 tax cut from previous years while lower-income families may see a tax increase due to cuts to deductions and the Earned Income Tax Credit.
Earned Income Tax Credit: This credit gave low-income working families a tax credit that would reduce tax burden and would often allow these families to receive a tax refund. Families of four making $20,000-$50,000 a year>> will now owe taxes where they would have received a refund in years past. According to the>> NC Budget and Tax Center, that means under the new law families making less than $41,000 a year should expect to see their overall tax bills increase as a percentage of their income.
Tax deductions: The state is ending deductions for money paid into a>> college NC 529 plan and for money spent on child care expenses. It also>> phased out deductions for educational expenses such as college textbooks, and some charitable expenses. Personal exemptions, like those used to claim a spouse and children are also now gone. These have been replaced with a higher standard deduction. Married-filing-jointly taxpayers can claim a $15,000 deduction and single taxpayers can claim $7,500. These are up from $6,000 and $3,000 previously. A child tax credit is increased to $125 from $100, but only for those making less than $40,000 a year.
New sales taxes: Electric vehicles must pay a $100 fee at purchase and>> university meal plans will now be taxed, an increase that can cost from $100-$300 per semester. Movie tickets are now taxed, as are concerts and sporting events. The annual back-to-school tax sales tax holiday has been cancelled, as well as tax breaks for energy efficient appliances.
The NC Justice Center>> says the bottom 80 percent of taxpayers, with income less than $84,000, will see their taxes go up on average, with the change only benefiting the top 20% of wealth earners. Even so, according to experts, tax revenue is expected to drop by at least $650 million in the state, exacerbating an overall dismal budget picture. Lawmakers in favor of these changes say they will bring new business to the state and will stimulate the economy.