Tax Cuts at the Top Add to NC’s Affordability Crisis
Reckless 2013 state tax cuts raise costs for working families
I pay a lower tax rate than my secretary. That’s wrong. – Warren Buffet
When it comes to trickle-down economics, the 2013 tax cuts in Kansas serve as an important lesson for North Carolina. Four years after slashing taxes on wealthy households and profitable corporations, the Kansas legislature repealed them citing steep job losses, depleted coffers, credit downgrades, and deteriorating public schools.
North Carolina’s Republican-led General Assembly is now at a similar crossroads, stemming from an aggressive regimen of personal and corporate income tax cuts approved in 2013. Since then, the state’s graduated personal income tax brackets have been eliminated, replaced by a single flat tax rate that has been essentially halved from 7.75% to its current 3.99%. That 3.99% applies to all earned income, whether it comes from a cafeteria worker, nurse, or top business executive.
Here’s what that flat personal income tax rate means in real dollars. In 2024, the richest 1% of North Carolinians – those earning more than $700,000 per year – received an average tax cut of $50,000, compared to what they would have paid in 2013. Families earning less than $25,000 saw only $400 in tax relief. Call it regressive, reverse Robin Hood, or upside-down, as a moral document, the budget is shameful.
Meanwhile, the Republican-led General Assembly has been slowly phasing out the state’s corporate income tax. By 2030, North Carolina is on track to become the only state in the nation with a zero corporate income tax. That’s right. Large, profitable corporations reaping enormous benefits from the state’s educated workforce, roads and bridges, public safety, and broadband will contribute nothing – not even a penny – to support these shared investments.
The Republican-led General Assembly’s 13-year tax cutting spree raises all kinds of pressing questions. Is it time for the General Assembly to cut bait and return to a tax system that fuels the economy not from the top down, but from the bottom-up and middle-out? A tax code ensuring that households and businesses alike contribute their fair share to offset recent cuts in federal funding, especially around cost-sharing for Medicaid and the Supplemental Nutrition Assistance Program (SNAP)? A tax code raising sufficient revenue to support long overdue and critical investments in health care, childcare, public education, housing, and transportation?
Above all, is it time to restore a progressive tax code recognizing that those who teach our kids, nurse the sick, stock shelves, police streets, repair cars and bicycles, wash dishes, and clean offices are the backbone of our economy and their community?
When profitable corporations and wealthy households don’t contribute their fair share to state coffers, working families are not just saddled with overly burdensome taxes; they bear the brunt of spending cuts and missed investment opportunities. The NC Budget and Tax Center estimates that this year’s scheduled cuts in the personal and corporate income tax rates will drain over $1 billion from next year’s coffers.
With $1 billion, the General Assembly could make meaningful, targeted investments that lower everyday costs for working families:
- $350 million to restore the state portion of the federal Earned Income Tax Credit, putting cash directly into the pockets of over one million workers.
- $250 million to expand childcare subsidies and raise provider reimbursement rates to address an industry-wide crisis in which childcare can be the equivalent of a second rent for many working families.
- $120 million to restore a state childcare tax credit that was eliminated in 2017 and could be used to provide additional relief for many working families.
- $200 million to build and renovate thousands of affordable homes through tried-and-true programs administered by the North Carolina Housing Finance Agency.
- $50 million to expand community clinics, especially in rural parts of the state where access to affordable health care is needed the most.
- $30 million to expand public transit so workers can free up a significant portion of their budget by commuting to their jobs without reliance on a car.
As tax and budget debates drag on in Raleigh, millions of working families living paycheck to paycheck suffer. North Carolina now has the dubious distinction of being the only state in the country still operating without a FY26 budget.
Voters signaled their frustration with the rudderless, Republican-led General Assembly during the March 3rd NC Primary. In what has been described as a “trainwreck for sitting state lawmakers,” nine incumbents lost their seats including Phil Berger, who has served his district for decades and led the State Senate since 2011. The powerful Berger lost to Rockingham County Sheriff Sam Page in a razor-thin race.
As the cost-of-living rises and the affordability crisis worsens, there is a blueprint for meaningful relief for workers in the Tar Heel State – a tax system rooted in fairness, public investments targeted to affordability, and a budget centered around shared prosperity. Will the Republican-led General Assembly take heed before the 2026 general election? If not, look for a seismic shift to the left this November.
