North Carolina lawmakers are seeking to shift much of the state’s tax burden off its wealthiest citizens and most profitable businesses and onto its low- and middle-income residents. After initially proposing to eliminate the state’s income tax outright, Republicans are instead introducing a flat income tax rate across all earning levels. The proposal unveiled Thursday would also expand the reach of sales taxes in the state, which hits low-income families hardest, and comes on top of the March repeal of a tax credit for 900,000 working families in the state.
The state’s effective tax rates already favor the rich. The North Carolina Justice Center, a progressive think tank in the state, explains that the richest one percent of tarheels pay 6.5 percent of their income in combined sales and income taxes at the state level, while the lower 80 percent of earners pay between 9 and 10 percent combined. Yet Republicans propose to give that top one percent a tax cut while hiking rates for those already paying more:
NCJC adds that the lost revenue from this plan “could be as high as $573 million” per year. Given that state law requires balanced biannual budgeting, the tax proposal is likely to force major cuts to public services if approved.
If all of this sounds familiar, it should. Supply-side economists have pushed for this sort of regressive tax reform in the name of economic growth for over 30 years, at all levels of American governance. Art Laffer, the chronically misleading godfather of this widely discredited approach to tax policy, helped press for the initial repeal proposal from North Carolina’s conservatives. Laffer’s had a prominent hand in the broad wave of state-level supply-side tax reform proposals since last year, and statehouse Republicans seem prepared to continue believing him even after his research for the American Legislative Exchange Council has been shown to be error-riddled.