ELLIOT: NC Senate tax plan a boon for families

Donald Lee Pardue—Flickr

On Tuesday, the North Carolina Senate passed another tax reform package. To tout the accomplishment, staffers in Senate leader Phil Berger’s office sent a news release to media with the headline “Senate Passes Billion Dollar Tax Cut for Middle Class, Job-Creating Businesses.” All true, but Berger really missed a chance to hammer home the family-friendly aspects of his plan. The news release should have been titled “Senate Passes Family-friendly Tax Plan.”The plan helps North Carolina families, both low-income and middle-class, in direct and indirect ways. It lowers the state’s personal income tax rate from 5.499 to 5.35 percent. The state’s income-tax scheme is called “flat,” but that’s somewhat misleading. There are two tax brackets currently, the 5.499 bracket and the zero bracket. And that’s where the plan also makes adjustments — it raises the standard deduction, aka the zero bracket, from $17,500 to $20,000 for married filers. That will mean more low-income filers will pay no tax at all on their earnings. The General Assembly’s research staff estimates that about 94,000 more North Carolina families will owe no taxes under the plan.Another direct help to families is an idea for which this page has advocated before. It changes the per-child tax credit of $125 into a progressive, per-child deduction that starts at $2,500 for earners below $40,000 and goes to $0 for families who earn more than $120,000. This part of the plan is undoubtedly a response to Gov. Roy Cooper’s budget proposal, which would restore the Child and Dependent Care Tax Credit that Republicans eliminated in a 2013 tax reform package.At the time, Republicans argued that the reduction in income tax rates overall was sufficient tax relief to allow for the elimination of the special credit just for families that use commercial child care. But politically, it opened the door for Cooper to portray himself as more family-friendly. Not anymore.Now Republicans — or at least Republican Senators, since the plan hasn’t passed the House yet — boast a plan that benefits many more families in many more ways than a narrow tax credit available only to families that use a “certified daycare provider” for childcare services. This last point is important. The child care credit has always helped middle-income households more than low-income families, since lower-income families tend to use family members and neighbors rather than commercial institutions for child care. Thus, Cooper’s credit would not be applicable to many lower-income families.Just as important, the child care credit puts the government in the position of favoring one method (commercial child care) over others (parental, family, or neighbor care). That’s not the proper role of the tax code.The Senate’s plan is tilted toward families in other ways. It increases the deduction for mortgage interest and property taxes, but also tiers the deduction based on filing status. Under current law, both a single guy and a family of six could deduct up to $20,000. Under the Senate plan, the single filer would be able to deduct only $11,000 while the family could deduct up to $22,000. That goes against efforts to simplify the code, but it certainly adds fairness and benefits families at the same time.The Senate plan includes indirect benefits to families as well. Corporate taxes are reduced to 2.75 percent for 2018 and 2.5 percent for 2019. (Aside: It’s hard to believe now that when Democrats ran Raleigh, the state taxed businesses at 6.9 percent, almost triple the lowest rate in the Senate proposal. Yet many in the media continue to cling to the myth that before conservatives were in control, the state was run by moderate, pro-business Democrats.)Republicans often argue that businesses are watching what policy choices are made in Raleigh, and point to North Carolina’s rising national ranking in tax climate and “best places to do business” lists as a source of pride — as well they should. But correcting the anti-family aspects of the tax code is just as important, and will have societal benefits that go far beyond what annual revenue figure the state can squeeze from the populous.A strong economy and strong families should go hand in hand. In the Senate plan, they do.
Drew Elliot is a member of the North State Journal’s editorial board, separate from the news staff. Unlike other newspapers, the North State Journal does not publish unsigned editorials; the author or authors of every editorial, letter, op-ed, and column is prominently displayed. To submit a letter or op-ed, see our submission guidelines.