The NC Budget & Tax Center (BTC) has developed a plan for raising revenues that will help to address the state's budget gap while simultaneously improving the long-term stability, adequacy and fairness of the state tax system. The BTC's plan, if enacted, would fill in approximately 30% of the state's budget gap in fiscal year 2009-10 and provide a net tax reduction for the bottom 60% of income earners. By asking large, profitable corporations and high-income taxpayers to contribute to the cost of preserving public investments, the BTC's plan maintains consumer spending and is better for the economy than regressive tax proposals.
The plan would:
- Close corporate tax loopholes and end ineffective business tax incentives;
- Broaden the base of the personal income tax and make it more progressive;
- Broaden the sales tax base to include digital downloads and services commonly taxed in other states; and
- Substantially increase the state Earned Income Tax Credit for working families.
Governor Perdue's budget wisely recognized the need to raise revenues to avoid deep budget reductions. Her proposal to substantially raise tobacco taxes is smart health policy, but from a tax-policy perspective, her overall revenue plan is highly regressive and would weaken the state's fiscal position in the future. For this reason, in addition to considering a substantial increase in tobacco taxes, lawmakers should fully consider the ideas put forth in the Budget & Tax Center's plan as they move forward in crafting the next state budget.