NC Justice Center's Living Income Initiative E-mail Update

January 7, 2003

Volume 3, Issue 1

The Living Income Initiative is a special project of the NC Justice and Community Development Center. It is
supported completely through contributions and foundation support. You can contribute directly by mail at
Living Income Initiative, P.O. Box 28068, Raleigh, NC 27611. Email us at sorien@ncjustice.org


LIVING INCOME EMAIL UPDATE


NEW REPORT SHOWING WHO PAYS NC TAXES


In this Living Income Update:   

• Below is the NC Budget & Tax Center media release regarding a new report analyzing NC taxes, who pays and how we compare to other states.

• Contact Elaine Mejia of the BTC at elaine@ncjustice.org or 919-856-2176 for more information.

• Link to Report

• Link to NC Summary

Happy New Year!


Media Release

JANUARY 7, 2003
Contact: Elaine Mejia 919-856-2176
FOR IMMEDIATE RELEASE
NC Budget and Tax Center


Low Income Tar Heels Face Harshest Tax Burden

National Report Finds That Poor Face Largest Tax Burden While High Income Taxpayers
Pay A Smaller Share Of Their Income In State and Local Taxes

Raleigh, January 7 – A new study released by the Institute on Taxation and Economic Policy (ITEP), Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, finds that low income Tar Heels pay the largest share of their income in state and local taxes, while high income North Carolinians face a much lower tax burden. Elaine Mejia, Senior Fiscal Policy Analyst for the North Carolina Budget and Tax Center, noted that, “While recent attention has focused on the fact that high income taxpayers pay a larger share of the personal income tax, lower income families face a much higher tax burden due to the state’s relatively high sales and excise tax burden. ”

The ITEP report finds that:    

• Sales and excise taxes account for the majority of taxes paid by the bottom 40 percent of non-elderly taxpayers, while income taxes account for the majority of taxes paid by the wealthiest 20 percent.

• High-income families benefit significantly from the fact that state income and property taxes are deductible for federal income tax purposes. In contrast, low and middle-income taxpayers, who are less likely to itemize their federal tax deductions, gain little from deductibility.

• The exemption of groceries from the state sales tax in 1998 has been largely offset by the 1.5% increase in the general sales tax rate since 1989.

• North Carolina’s income tax is progressive – that is, high income households pay larger share of their income in this tax than do lower income households – however, the state’s failure to index the personal exemption to inflation has resulted in income tax increases for lower- and middle-income taxpayers.

• The bottom 20% of taxpayers are the only income category to experience an increase in their state and local taxes as a percentage of their income during the period from 1989 to 2002. In contrast, the top twenty percent of taxpayers experienced the largest decrease in state and local taxes as a percent of their income.

Mejia added, “New revenue must be part of the solution to the state’s budget crisis. However, this study shows that low-income North Carolinians are already paying more than their fair share of state and local taxes and should not bear the brunt of tax increases needed to close the budget gap.”

The ITEP study looked at the impact of current North Carolina tax law as applied to the income distribution for state households in 2000. In addition, the study compared the distribution of the tax burden under the state’s 1989 tax law to that in 2002 to show how policy changes during the 1990’s affected the distribution of the state’s tax burden.

The ITEP study can be found on the web at www.itepnet.org. The study’s authors can be reached at (202)626-3780.

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The North Carolina Budget and Tax Center is a private nonprofit, nonpartisan budget and tax research organization that provides timely, accessible, and credible analysis of state and local budget and tax issues with a special focus on the impact of state fiscal policy on low- and moderate-income North Carolinians. The Budget and Tax Center is a special project of the Justice and Community Development Center.

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CONTACTS & LINKS

Living Income Email Update and Advocacy
Sorien K. Schmidt 919-856-2151 sorien@ncjustice.org		 Living Income Research and Grassroots Campaigns
 Elizabeth Jordan 919-856-3185
 Living Income Grassroots Education and Organizing
Sheila Kingsberry Burt 919-856-3194
Elaine Mejia
NCJCDC Budget & Tax Center		 How to Take Action The Living Income Agenda (PDF)
Subscribe to the Living Income Email Update Earned Income Tax Credit (EITC) Fact Sheet Living Income Fact Sheet
Working for a Good Living Workshop brochure (PDF) Learn more about public assistance in North Carolina. North Carolina EITC Tax claims by county and as a percent of income tax filers for 1998.