Taxing the poor to pay for the rich

Caps on the income tax and restricting local governments from raising property taxes will cost those who can least afford it.

Governor Josh Stein called the legislature’s push to cap the personal income tax at 3.5% a scam. He’s right and I think he understates what Republicans are doing. They’ve been on a quest to shift the burden of funding government onto the poorest North Carolinians and onto county and local governments. So far, they’ve been remarkably successful with too little pushback.

When they took control of state government, Republicans eliminated the Earned Income Tax Credit — a $150–$500 annual break offered to nearly one million struggling North Carolinians — and used the savings to cut taxes for the state’s highest earners and largest corporations. We are the only state in the country to have ever eliminated an EITC.

By increasing the sales tax and reducing the income tax, Republicans have successfully reduced the share the wealthiest pay in taxes while increasing the share that the poorest pay. Since 2010, the top 1% has seen their tax burden drop by 1% while the poorest 20% have seen their burden increase by 0.6%. In real terms, Republicans raised taxes on poor people to pay for tax cuts for rich people.

Republicans want to lock in these gains for the wealthiest North Carolinians by passing a constitutional amendment to cap the income tax rate at 3.5%. As Stein correctly notes, the move would force an increase in the sales tax if the state needs more revenue, further increasing inequality by shifting more burden onto lower income families.

The move is part of a coordinated effort to prevent governments from funding needed services. At the same time they are trying to cap the income tax at a ridiculously low rate, they are also trying to limit counties’ and municipalities’ abilities to increase property taxes. So as the legislature increasingly passes costs to local governments, they are hamstringing local officials’ ability to pay for services. Those services will eventually go away — a win for Republicans and a loss for the people who need the help.

We’ve seen this scenario play out in schools. As the legislature reduced funding for schools, county governments either made up the lost revenue through local tax dollars or boards of education cut services. Republicans came into power screaming that our public schools were broken and then proceeded to break them. After fifteen years of controlling budgets, they still claim our public schools are broken as they offer tax breaks in the form of vouchers to some of our wealthiest citizens.

Republicans are going to ask more from the poorest citizens and less of the wealthiest. As government needs more revenue, they will raise it from regressive sales taxes, shifting the burden onto the shoulders of working families. They will never ask the people who have benefited most from our form of government and our economic system to pay more. They will always look for ways to let them pay less, even if it costs the rest of us.