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Monday Numbers: A closer look at taxes and who pays what in North Carolina

[1]Today is Tax Day. It’s a day that many Americans have come to instinctively dread, but here are a couple of important facts worth remembering today:

Number One is that as much as we all might wish it weren’t so, taxes and the widespread adherence to paying them are what sets our country apart from much of the rest of the world. Not only do taxes undergird the basic legitimacy of our government, they pay for the public services and structures – schools, Social Security, transportation, public safety, environmental protection, armed services, a courts system – that knit together our incredibly diverse nation. Without them, we’re Russia or some third world autocracy.

Number Two is that our tax system has grown increasingly unfair and tilted in favor of the rich. Over the last few decades, trillions of dollars that would and should have once gone toward essential public services and structures have instead gone into the pockets of the top 1%.

Consider the following facts about North Carolina’s tax structure:

9.5% – amount of their incomes that the poorest quintile of North Carolinians (with average incomes of $11,200 per year) pay annually in state and local taxes combined (Source: Institute on Taxation and Economic Policy, “Who Pays?” Oct. 2018)

9.4% – amount paid by the middle quintile (with average annual incomes $40,100) (ibid.)

6.4% – amount paid by the richest 1% (with average annual incomes of $1,085,000) (ibid.)

$3.6 billion – annual reduction in state government revenue as a result of tax cuts enacted by the North Carolina General Assembly since 2013

28% – amount of the total state income tax that flowed to the richest 1% (“Higher Rates on Higher Income: Why a Graduated Income Tax is Good Policy for North Carolina,” N.C. Budget & Tax Center, March 2019)

$23,600 – average annual income tax reduction that NC millionaires are enjoying as a result of adoption of a flat 5.25% state income tax (ibid.)

$6,461 – amount by which that the cut would be reduced if North Carolina enacted a “millionaire’s tax” that applied a 7% marginal rate on annual incomes that exceed $1 million (ibid.)

$362 million – annual amount that such millionaire’s tax would add to state revenue (ibid.)

Less than $100 – average annual income tax reduction since 2013 for the middle 20% of North Carolinians (“Marginal versus Effective Personal Income Tax Rates: Understanding what you actually pay (paid) in income taxes,” N.C. Budget & Tax Center, Feb. 2017)

6.9% – North Carolina’s corporate income tax rate in 2013 (“Corporations over Carolinians? Why North Carolina Doesn’t Need to Give Corporations More Tax Cuts,” N.C. Budget & Tax Center, May, 2018)

2.5% – corporate income tax rate in 2019 (ibid.)

$600 million – annual hit to the state budget as a result of the reduction (ibid.)

More than 80% – share of the benefit from the corporate income tax cuts that flow to people who live outside of North Carolina (ibid.)

Almost 50% – share of the benefit that flowed to individuals with annual incomes of $500,000 or more (ibid.)

0 – of the states that tax corporate income, the number that have a lower rate than North Carolina (ibid.)

$670 million – annual hit to the state budget that would occur if Republican state senators carry through on their expressed plan to eliminate the state business franchise tax (“Reform — don’t eliminate — the franchise tax,” N.C. Budget & Tax Center, April 2019)

Second lowest – place where N.C. business taxes already ranked national as of 2017 (ibid.)

$2.2 billion – annual amount that the federal Earned Income Tax Credit puts in the pockets of 970,000 low-income working families in North Carolina (“A Bottom-Up Tax Cut: A North Carolina Earned Income Tax Credit Boosts Local Communities, Working Families,” N.C. Budget & tax Center, March, 2019)

1.2 million – number of children included in those families (ibid.)

More than $400 million – annual amount that a state-level EITC set at 20% of the federal level would add to the incomes of those households (ibid.)

1 – number of iconic Republican presidents (Ronald Reagan) who described the EITC as “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress” (“Reagan’s Actions Made Him a True EITC Champion,” Center on Budget and Policy Priorities, Aug. 2014)

The bottom line: America and North Carolina both need strong and fair tax systems. Paying taxes and working to halt and, ultimately, reverse the growing inequity and inadequacy that plague them are both acts of high patriotism.