Greensboro News & Record:
Looking at Tax Reform

By Travis Fain

John Frank at the N&O laid out the basics on a tax plan moving through the N.C. House today. It differs considerably from the Senate plan, but given that Gov. Pat McCrory has sided with the House on this one, you have to expect any final changes to be closer to the House proposal than the Senate’s.

A married couple with two children making $40,000 a year would get an estimated $40 tax break when the legislation is fully implemented, according to a new legislative analysis. If the same family earned $250,000 a year, it would see a roughly $1,700 break. The tax cut increases to at least $12,500 if the family makes $1 million.

All single taxpayers would see a tax break with the size increasing with income. At $40,000, the tax cut is about $200, while the break for those making $100,000 would be about $1,000, the analysis estimated.

The N.C. Budget and Tax Center used a different method to analyze the House plan, which you can read up on through this series of posts:

Gracie, as her neighbors call her, lives alone and receives around $12,000 in taxable income, which supplements her social security benefits and helps pay for her monthly medical expenses and other necessities. Under the House tax plan, the amount of income and sales taxes paid by Gracie would increase, about 6 percent overall, compared to what she would pay under current tax laws. This increase in tax load is a result of the tax plan expanding the sales tax base to cover more goods and services as well as the elimination of the additional standard deduction allowance provided to elderly tax filers.

The state’s CPA’s have done some analysis, too, and summarized the effects of the various tax bills proposed in Raleigh in a convenient chart (pdf) you can access through their Tar Heel Tax Reform website.

For now I’d focus on the far-right column, and House Bill 998, which is likely to pass the N.C. House today. But of course elements of the other bills could absolutely become part of agreed-to reforms between now and end of session.

We’ve heard from some local nonprofits concerned about these proposals, and particularly the Senate’s, which would end the break they currently enjoy on sales taxes. That’s not part of the House plan, according to the N.C. Center for Nonprofits. The House proposal would have the following effects for nonprofits, according to the center:

  • Maintains sales tax refunds on nonprofits’ purchases.
  • No cap on charitable deductions (thanks to the Appropriations Committee vote yesterday).
  • Eliminates tax credit for charitable contributions by non-itemizers.
  • Expansion of sales tax to services doesn’t cover services offered by nonprofits.
  • Maintains corporate tax deduction for charitable contributions.
  • Reduction in future state revenue could lead to cuts to state funding for nonprofits.