Tax day brought some sticker shock
Published April 22, 2015
Editorial by Jacksonville Daily News, April 20, 2015.
Tax season is never fun, but it was even less so this year. For a number of North Carolinians, 2014 brought some ugly surprises.
New rules approved by the General Assembly resulted in sharply higher state taxes for some.
Lawmakers did away with the graduated state income tax rates of 6, 7 and 7.75 percent.
There’s now one single rate of 5.8 percent for all N.C. taxpayers. That was accomplished at least partly by scaling back the itemized deductions allowed by the state.
That came as good news for people who file simpler tax returns with few itemized deductions, The Associated Press reported. They benefited from the lower rate and a higher standard deduction.
But AP quoted accountants who say many of their clients — generally people with more complicated tax returns — are paying higher tax bills or at least getting back smaller refund checks from Raleigh.
Republicans who now run the legislature say higher tax bills and lower refunds don’t always equal higher taxes. They say that as tax rates fell, so did the amount withheld from paychecks, which could account for the differences.
The item causing the biggest uproar is the elimination of deductions for medical expenses.
Retirees who rely largely on Social Security — exempt from state income taxes — didn’t save much from the lower rates but did get walloped by the expiration of the medical expense deduction, which no longer mirrors deductions allowed on federal tax returns.
Meanwhile, the Institute on Taxation and Economic Policy reports that in all 50 states, the wealthy tend to pay a lower percentage of their incomes in taxes than low- and middle-income taxpayers.
The institute says states are relying largely on sales taxes, which hit poor and middle-income families especially hard because they spend a bigger chunk of their paychecks on food and consumer goods.
North Carolina lawmakers expanded the reach of state sales taxes while lowering the corporate income tax rate. They also eliminated the state’s earned income tax.
North Carolina has joined just seven other states in having a flat tax for all incomes, rather than taxing higher incomes at a higher rate.
Defenders of graduated tax rates say it’s only fair to ask the wealthy to pay a higher percentage of their incomes in taxes. Opponents are just as convinced that flat taxes are fair taxes, and they are in the majority in the N.C. General Assembly.
Republicans say the changes make North Carolina more competitive and have improved the economy while keeping more money in people’s pockets.
Some lawmakers in the state House are working to restore a medical deduction; but for those hurt by the end of the earned income tax credit and those hit by cuts in popular deductions, there’s little relief in sight.
April 22, 2015 at 10:32 am
Richard L Bunce says:
So every NC Income Tax payer received an State Income Tax rate reduction and a more than doubling of the State Income Standard Deduction and a few small groups of loyal Democrats lost their special interest tax credits and deductions. A century of Democratic Party vote buying comes to an end.