The poorest 20 percent of North Carolina earners pay more than 40 percent more in taxes, as a share of their income, than the richest one percent.
That’s according to the recent “Who Pays?” study, released by the Institute of Taxation and Economic Policy, and the Budget & Tax Center, a project of the NC Justice Center.
The study finds that North Carolinians earning less than $18,000 annually pay 9.2 percent of their income in taxes; compared to 5.3 percent for those earning more than $376,000 a year. ITEP ranks North Carolina as the 31st most unfair state for tax policy.
Cedric Johnson, a public policy analyst with the Budget & Tax Center, told WCHL that tax policies in North Carolina are basically “upside down.” That’s partly because North Carolina relies a lot on sales taxes to raise revenue. And a flat personal income tax isn’t levied on the basis of the ability to pay.
“When looking at that 31st ranking, one could rest on their laurels and say, ‘Yeah, well, we’re towards the middle,’” said Johnson. “But when you look at how that actually plays out into the lives and the pocketbooks of North Carolinians, one has to be concerned with the reality that we have a tax system here in the state that’s asking those with the least to contribute a larger share of their income toward public investments that we all depend on and value, here in the state.”
Rep. Verla Insko, a Democrat who represents the 56th district in the N.C. General Assembly, said that a lot of top earners may not even be aware of this huge disparity, since they already do pay a lot in taxes, as top earners.
“Poor people are paying for our police; and for inspection of our restaurants; and all kinds of things that are part of just ordinary government,” said Insko. “We have to have that conversation, at some point, about what’s a fair way to support essential government services.”
ITEP predicts that if North Carolina and many other states continue down this road, it will make it harder and harder to raise revenues.
The study recommends relief for lower income taxpayers, such as the Earned Income Tax Credit; Renter’s Credit; and a Child Tax Credit.