December 13, 2013
Why changes in state tax law could have you seeing red
If you work in North Carolina, you have probably already noticed one effect of Republicans’ new tax plan – being required to complete a new Form NC 4. That’s necessary because the Republican tax plan signed into law earlier this year by Governor McCrory eliminates personal exemption allowances – along with many other popular deductions and tax credits.
No longer will workers be able to claim exemptions for themselves, their spouse, or their children and other dependents, meaning they will have to have more state income tax withheld from their paychecks.
Families who found a way to put aside money for their child’s college education in a North Carolina 529 savings plan will no longer be able to deduct those contributions from their taxes.
Pensioners and people living on other private retirement income will lose their $2000 exemption.
Some 900,000 low-wage working families will keep less of what they earned next year thanks to the elimination of the state Earned Income Tax Credit (EITC). Households with children will also have to pay more for child care thanks to the elimination of that tax credit as well.
What about income and sales taxes?
Income tax rates will fall to 5.75% for everyone by 2015 – millionaires and minimum wage workers alike – a savings of between 0.25 and 2.0%, depending on which of the three tax brackets you used to fall into. Going forward, there will be only one tax bracket for everyone.
By adopting this flat income tax, Republicans actually made our state income tax less fair by giving a windfall to North Carolina’s wealthiest taxpayers. The average millionaire in North Carolina will get a nearly $10,0o0 tax cut.
Corporations will also see a steep decline in their state income tax rate, down to 5% next year and could fall even lower by 2017, even as corporate profits are at all-time highs. As worrisome as the $423 million price tag for these cuts is the fact that 90 percent of the cut will benefit out-of-state residents.
Unfortunately, the tiny income tax savings for low- and middle-income taxpayers will be more than offset by their lost EITC and other expired tax credits and the vastly-increased scope of sales taxes. In fact, the Republican tax plan increases taxes on average for the bottom 80% of taxpayers.
Beginning next year, the sales tax will apply to many, many more goods and services than before. That means new taxes on most entertainment including movies, concerts, plays, museums, and sporting events. College students (or their parents) will have to pay sales tax on their meal plans. Need to get your car serviced or repaired? There will be a new sales tax on that, too, as well as maintenance agreements for office equipment or household appliances. Even newspaper sales and subscriptions will be taxed.
Write a letter to the editor!
People ought to know the truth about the changes made to North Carolina tax law.
Republicans in the General Assembly continue to insist that everyone will get a tax cut, but when the Revenue Laws Committee met recently to discuss ways to fix problems with their law, General Assembly researchers told them that there will be winners and losers and some folks will pay more thanks to the changes.
We need your help to set the record straight. These tax changes are a tax cut for the top that will hurt North Carolinians paychecks, pocketbooks, and the core public services people and businesses alike depend upon for economic success. Our friends at the North Carolina Justice Center have made it easy for you to send a letter to the editor of a newspaper near you.
So are you fired up about tax changes that steal from the poor to give to the rich?
Are you worried about how you will be able to afford your next car repair bill now that it will be taxed?
Are someone who thinks profitable out-of-state corporations should pay their fair share of North Carolina taxes on North Carolina profits?
Pick your passion, then write a letter to the editor about why Republican tax law changes have you seeing red.