North Carolina Republican lawmakers, following on the heels of Gov. Bobby Jindal (R-LA) and Gov. Sam Brownback (R-KS), have proposed eliminating their state’s income tax and corporate tax, replacing them with an expanded sales tax. Such a move is highly regressive, pushing taxes onto those lower on the income scale who are likely to spend most or all of their income.
The state’s Republican governor though, seems to be wary of the plan, with his budget director admitting that it would “absolutely” be regressive:
Gov. Pat McCrory’s budget director distanced the Republican chief executive from a proposal to eliminate income taxes in North Carolina and expressed his own “great concerns” with the concept being floated by leading GOP lawmakers. [...]
In particular, Pope cited a concern that the higher sales tax is “absolutely, no doubt” regressive, meaning it would hurt low-income taxpayers the hardest. He said it amounts to a gross income tax “without any regard to whether you are making any money.” And he worried about upsetting the current three-tier system of income, sales and properties taxes, calling it “fairly balanced.”
The North Carolina Justice Center’s budget and tax project found that the plan proposed by the GOP would “provide a significant windfall to the wealthiest 20 percent of state taxpayers while requiring low- and middle-income households to pay more. A family earning $24,000 a year would see its taxes rise by $500, while one earning $1 million would get a $41,000 break.” This chart shows the change in taxes as a share of income for various income levels: