With North Carolina lawmakers currently struggling mightily to find the revenue necessary to provide public school teachers and state employees with meaningful raises and repair neglected and crumbling infrastructure, a new report from national fiscal policy experts has identified an obvious revenue source that would, if tapped, produce positive ripple effects throughout the state economy.
According to “State Estate Taxes: A Key Tool for Broad Prosperity,” a new report by the Center on Budget and Policy Priorities, North Carolina needs to take a more sensible approach to revenue by reinstating an estate tax so the state can afford to invest in its schools, transportation, health care, and communities for everyone.
If all states without an estate tax reinstated this tax, the report finds, they could raise an additional $3 billion to $6 billion a year, says For North Carolina, reinstating an estate tax would generate $100 million to $170 million a year — funds that can boost public investments to promote broadly shared economic prosperity across the state.
The estate tax only affects inheritances of more than $5.25 million, so most North Carolinians would owe nothing. The year before North Carolina eliminated the estate tax, only 23 of the wealthiest people had to pay. With an estate tax, North Carolina would have more resources to invest in broad prosperity – and that pays off for everyone in our state.
Proponents’ claims that this tax break for the wealthiest would boost economic growth and investment in the state have not held up, the report shows. States that have reduced or eliminated their estate taxes are actually seeing higher tuition at public colleges; cutbacks in teachers and resources at K-12 schools; and deteriorating roads, bridges, water treatment facilities, and other public infrastructure.
The claim that estate taxes drive people from state is also vastly overblown, according to the report.
“There is no consistent effect of state tax policies on elderly migration across state lines, and any revenue that might be lost by a small number of people moving would be more than made up by the gains for those who stay,” says Cedric Johnson, Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center. “Is it worth giving up a significant portion of the revenue we need to help our communities thrive just because it might keep a few wealthy people in the state?”
Today in North Carolina, the more money you make, the smaller the share of your income you pay in state and local taxes, a result of policy decisions made by state lawmakers. Changing the tax code to give big breaks to the people at the top while reducing investment that helps communities thrive prevents our state from moving forward. Reinstating an estate tax is a step lawmakers should take to help ensure that our state’s tax system works for everyone.