Any good financial literacy program that we fund at United Way of the Greater Triangle has at its very core a simple philosophy. It must teach smart budgeting and in order for households to get ahead, there has to be more income than expenses. Unfortunately, the State of North Carolina is beginning to walk on some very thin ice as the General Assembly begins planning for changes in the tax code. These changes are supposed to improve state revenue. However, the recent plan that is being considered by North Carolina’s Senate leaves North Carolina and its middle class and poor citizens vulnerable.
The proposed plan would eliminate personal income tax, corporate taxes, and business license taxes. That eliminates $12 billion in revenue that is used for public schools and human services across the state. So how do they propose to raise revenue? The plan’s proponents suggest increasing sales taxes on goods and services. Sounds reasonable, I’d love to pay fewer taxes on my personal income. Oh wait, that means the tax on food, gas, home repairs, and car repairs will all increase. Hmmm. I wonder if we are “robbing Peter to pay Paul.”
The opponents of this argue that expanding the sales tax means a much bigger contribution from the non-wealthy. According to the Budget and Tax Center, “Under the (proposed Senate) plan, a family earning $24,000 would see its taxes increase by $500, or by 2.1 percent of its income, while a household earning $1 million would get a $41,000 tax cut, representing 4.5 percent of its income.” It also means that if personal income tax goes away things like the Earned Income Tax Credit and the Child Care Tax Credit are likely to go away too. Cutting these tax credits are essential ways that working households are increasing their income. In fact we know one of the best antipoverty strategies around is helping qualified households receive the Earned Income Tax Credit.
United Way of the Greater Triangle is committed to helping provide services in our communities to those of limited wealth. However, I fear the path the state may go could undermine efforts to improve each households situation. I’m worried that we will see even greater human service needs if services and education take further cuts because the state’s primary revenue stream has been eliminated.
Graphic from antiguaobserver.com