As everyone knows, yesterday was the deadline for people to file their state and federal tax returns. But according to the non-partisan Tax Foundation, “Tax Freedom Day” in North Carolina is today, April 16.
What is Tax Freedom Day? It’s the day when each of us has earned enough income to pay off our taxes (and it differs from state to state). Here’s the explanation from their website:
“Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income. In 2015, Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes, for a total tax bill of $4.85 trillion, or 31 percent of national income.”
In other words, imagine that government revenuers didn’t take their cut from your paycheck over the course of the entire year. Instead, rendering unto Caesar would be front-loaded: that is, your entire paycheck would be taken by the government from the first day of the year until your tax debt (at all levels, federal, state, and local) was entirely paid off. How many of your paychecks would go entirely to the government? If you live in North Carolina and you’re paid every two weeks, you wouldn’t have received any of your first seven paychecks this year — they would have all gone directly to the tax man. Seven biweekly paychecks brings you to today, April 16.
But it could be worse: in liberal states, where the tax burden is a lot heavier than here in North Carolina, Tax Freedom Day comes even later. In Illinois, for example, Tax Freedom Day is April 30. In California, it’s May 3. In New York, it’s May 8. And in Connecticut and New Jersey, it isn’t until May 13. Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, and Wyoming) don’t collect taxes on earnings at all.
National Tax Freedom Day is on April 24, so at least North Carolina is better off than many other states (click here for a neat map from the Tax Foundation that compares the relative tax burdens in each of the 50 states.)
How did that happen? In 2013, the Republican-controlled General Assembly not only lowered personal income tax rates for all income groups, but they scrapped the idea of the progressive income tax and replaced it with a flat tax. They lowered taxes on businesses, too. And, to make the whole mess simpler, they did away with lots of special carve-outs and loopholes that benefited only a small number of people. Essentially, they cleaned up a complicated tax code that had gone fundamentally unchanged since before World War II — and this year was the first time it all went into effect.
Republican tax cuts will save North Carolinians over $2.4 billion in 2015-2016 alone.
Liberal activists, naturally, are apoplectic. “North Carolina’s professional Left has launched an all-out assault on a) Republicans and b) the truth,” said Senate Leader Phil Berger. “Here’s their move: Since raising taxes $1 billion in their final days at the helm of state government, they fought tax cuts and reform at every step, lobbying for billions of dollars in hikes. It all produced some of Democrats’ most severe electoral beatings in state history. So now, they’re re-branding the cuts they lambasted for the past four years as – clever genius here – increases.”
It’s enough to make your head spin. WWNC’s Pete Kaliner had a little fun with the left’s dishonesty on taxes over at his blog today.
“The vast majority of North Carolinians will keep more of their own tax dollars due to policy decisions made by the Republican General Assembly during the past two legislative bienniums,” continued Senator Berger. A nonpartisan legislative analysis shows tax reforms enacted by the legislature, including the expiration of some special tax loopholes, will cut taxes by close to $2.4 billion in Fiscal Year 2015-16, compared to when Democrats last controlled state government in 2010.
The single biggest savings comes from allowing a temporary one-cent sales tax to expire, which has returned at least $1 billion to North Carolinians’ pockets every year since it ended in 2011. In spite of rhetoric claiming to want to protect lower-income individuals, legislative Democrats fought to extend this regressive tax on working families.
And in 2013, the General Assembly passed and Governor Pat McCrory signed into law historic tax reform that significantly reduced the top personal income tax rate – from 7.75 percent (then the highest in the Southeast) down to 5.8 percent in 2014 and 5.75 percent in 2015 – and created a zero percent tax bracket for up to the first $15,000 of income.
“While you can spin rhetoric, you cannot spin basic math – and nothing the left says can change the fact that North Carolina families in every income category have seen their taxes go down,” said Senator Berger.
“The tax reforms we passed are working – they’re boosting the state’s climate for job creation, driving down unemployment and returning more money to the North Carolina families and small businesses that earned it,” said Senate Finance Committee Co-Chairman Bob Rucho.
In addition, it revised the formula to ensure the state no longer over-withholds tax dollars from paychecks and receives what amounts to interest-free loans from taxpayers over the course of the year. Under the change, most North Carolinians will see a net reduction in their overall tax payments, even if they receive a smaller refund check or make a payment to the state. And they will control more of their own money to spend, save or invest throughout the year.