The One Chart You Need to Understand “Tax Reform”


Really. Just one. This one:

What’s this about? Details after the jump.

So, in case you didn’t know, the state GOP is talking about eliminating the personal income tax in the upcoming session. Why would they do that? Well, it’s essentially an Art-Laffer-inspired crusade to cut the tax burden for our wealthiest households while increasing it for pretty much everyone else in the state. According to the folks at TogetherNC,

Eliminating the personal income tax would result in one of two scenarios:

1. The loss of more than half of the state’s revenue — nearly $10 billion. Policymakers would then have to cut funding for education, health care and infrastructure.


2. North Carolina would have to TRIPLE its state sales tax rate, resulting in a GREAT TAX SHIFT, in which middle-class families would take on a dramatically increased load while the rich would get a tax cut.

Hence the graph. If the General Assembly relies on sales taxes to make up the revenue shortfall, then that is the effect “reform” will have on people’s incomes: the top 20% of households will pay less in taxes—a household making $1 million a year, for example, will pay $41,000 less—and the bottom 80% of households will pay more, with a household bringing in $24,000 paying an additional $500, mostly in state sales taxes. In other words, this shift would hit our poorest households harder than any.

Actually, though, to get the full story, you should probably look at another chart. This one.

That’s the way things stand today, with the state and local tax burden before Messrs. McCrory, Tillis, Burger, and Pope have had a chance to “fix” things. Our tax structure in this state is already regressive. And chances are good that any tax reform that comes out of this session will make it even worse. Is anyone surprised?

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