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General Assembly Policies Cut Taxes, Boost Economy

Since 2011, the General Assembly has returned taxpayer money to North Carolinians through historic, economy-boosting tax cuts. Prior, the legislature imposed the highest taxes in the Southeast – and some of the highest in the country – on working North Carolina families. The revenues extracted from the citizenry were used on failed spending programs that threw North Carolina into crisis during the recession.

“North Carolina’s economy is booming. Conservative Republican policies lowered taxes, created jobs, and stabilized a budget that was in freefall when we took over in 2011, all while investing record amounts in public education. That’s why people are moving to this state in droves.”

Beginning in 2011, the legislature made it their goal to reduce the tax burden, reform the tax code and strengthen our business climate – empowering the private sector to create new jobs and drive down unemployment. That same year Republicans made good on their promise to return $1 billion to North Carolinians’ pockets by eliminating “temporary” sales and income taxes.

Then, in 2013, the General Assembly implemented historic and comprehensive tax reform that served as a model for the entire nation. The Tax Simplification and Reduction Act cut the individual tax rate from 7.75 percent to 5.8 percent while increasing the standard deduction from $6,000 to $15,000. In 2016, lawmakers passed further cuts, dropping the individual tax rate to 5.499 percent and increasing the standard deduction to $17,500. Next year, the individual rate will decrease again to 5.25 percent and the standard deduction will rise to $20,000.

According to the non-partisan Fiscal Research Division, those earning less than $50,000 per year will benefit most from the tax cuts, with a decrease in their effective tax rate from 2.8 percent to 2.4 percent. That income bracket will also pay a smaller percentage of the state’s overall taxes, dropping from 11.2 percent to 10.4 percent. By comparison, taxpayers earning more than $200,000 per year will also see a tax cut but pay slightly more of the total tax share, climbing from 37.5 percent of the state’s total revenues to 38.4 percent.

Percent of Total Tax Liability by Income in Tax Year 2019

Federal AGI

Current Law

Republican Tax Cuts

Less than $50,000

11.2%

10.4%

$50,000-$99,999

21.7%

21.5%

$100,000-$199,999

29.6%

29.7%

Greater than $200,000

37.5%

38.4%

Source: Fiscal Research Division

Average Effective Tax Rate by Income in Tax Year 2019

Federal AGI

Current Law

Republican Tax Cuts

Less than $50,000

2.8%

2.4%

$50,000-$99,999

3.7%

3.5%

$100,000-$199,999

4.1%

3.8%

Greater than $200,000

4.2%

4.0%

Total

3.8%

3.6%

Source: Fiscal Research Division

Republican tax and budget policies have resulted in a booming North Carolina economy. According to the federal Bureau of Economic Analysis, personal income in the state climbed by more than 10 percent between 2013 and 2016 (the last year for which data is available), which is the 10th-highest growth rate in the country and well above the national average. North Carolina’s population has also grown since 2013, significantly outpacing the national and regional averages.

The number of people employed in North Carolina climbed by 15.7 percent since 2011, also well above the national average, and the state’s Tax Foundation business climate ranking catapulted from 44th to 12th.