Raleigh, N.C. The North Carolina Senate unanimously passed legislation Tuesday to provide an immediate $145 million tax cut this year and an additional $205 million tax cut next year mostly benefiting middle class families and small businesses.
The Middle Class Tax Relief Act, sponsored by Senate Finance Committee Chairmen Bob Rucho (R-Mecklenburg), Bill Rabon (R-Brunswick) and Jerry Tillman (R-Randolph), would increase the state’s zero percent tax bracket by more than 12 percent over the next two years. This means all North Carolina taxpayers, regardless of income, will pay no state income taxes on more of their earnings.
A similar, but longer implementation act was passed in the House budget last week. Governor Pat McCrory cautioned the tax cuts risked problematic revenue losses for managing state priorities, but Rucho downplays the hesitancy.
“To wait four years is like dribbling it out, and especially since the $329 million that came in this year as an increase above what we expected in revenue – that is the taxpayers’ money, it should be turned to the taxpayers and in doing so we are targeting the middle class in a big way,” said Rucho.
While all North Carolina taxpayers will see tax relief, according to the non-partisan Fiscal Research Division, 86 percent of the tax cut will benefit working and middle class families earning less than a combined $80,000 per year.
For example, a married couple with two children earning the N.C. median household income of $44,000 annually will see an additional tax cut of $110 next year under the bill. Combined with other major tax reductions enacted by the General Assembly, the same family will pay about $340 less in state income taxes than they paid in 2013. Impact of Senate Middle Class Tax Cut Taxpayer Taxes 2012 Taxes 2016 Taxes 2017 Family With 2 Children Making N.C. Median Income of $43,916 $ 1,542 $ 1,326 $ 1,203 Net Tax Cut – ($216) ($339) Sen. Angela Bryant (D-Rocky Mount) advised that while she supported the bill Tuesday, she doesn’t think it does enough for the poorest families when compared to the Earned Income Tax Credit (EITC).
“I’m supoorting it because I know we don’t have here support for the EITC, which would provide 80 percent of of this $200 million to families below the $35,000 a year mark,” said Bryant.
The EITC was a refundable tax credit targeted to low and middle income families that was allowed to expire in 2014.
Sen. Andy Wells (R-Hickory) thinks the Middle Class Tax Relief Act does a better job at targeting low and middle income families.
“In seven out of eight categories, this bill puts more money in the pockets of those families than the EITC, and the one category that it doesn’t is because of a little glitch in that EITC that makes it refundable. That is, [the EITC is] not a credit; it’s a welfare check,” said Wells.
Sen. Floyd McKissick, Jr. (D-Durham) thinks that is exactly why the Middle Class Tax Relief Act doesn’t go far enough.
“This bill certainly provides relief to middle income taxpayers. That’s undeniable,” said McKissick. “[But] so many of the tax cuts that have been made have gone to assist those that have high incomes. We could afford to do both; we could have the refundable EITC and we could provide relief provided by this bill.”
Echoing Rucho, Sen. Jerry Tillman (R-Archdale), a sponsor of the bill, suggested their is a basic difference in philosophy between supporters of the EITC and those of the Middle Class Tax Relief Act.
“It’s not our money [to give away]. It’s their money and we want to give it back to them with this zero bracket cut which is a significant thing for lower income people,” said Tillman. “If you exclude [$17,500] of a $35,000 job you’ve just about taken every bit of their tax liability away from them.”
Sen. Tom McInnis (R-Rockingham) urged his colleagues in the Senate to support the measure.
“This is a fabulous piece of legislation for rural North Carolina,” said McInnis.
The Middle Class Relief Act will now head t the North Carolina Senate for consideration as a standalone bill, or incorporation into a final budget compromise bill.
Since Republicans assumed leadership of the North Carolina Senate in 2011, they have passed over $3 billion in tax relief for North Carolina taxpayers.