Comment

NC is an unwanted No. 1 in tax rate

June 14, 2013 

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CHRIS SEWARD — cseward@newsobserver.com Buy Photo

I am a self-described libertarian, and when it comes to taxation I believe less is better.

There are no limits to the “needs” that governments will recognize and want to address if only they had more of our money.

Therefore, we must aim to limit the amount of tax money available to governments.

Let’s look at state income taxes.

If we are going to be a number, we might as well be No. 1, right?

Our state is First in Flight. It says so on our license plates.

Several list-makers have awarded North Carolina or its cities the coveted No. 1 for being the most wired or for having a good business climate or for being the safest. We all feel better for it.

But our state also is No. 1 on a list you might not have looked at.

Among all 50 states and the District of Columbia, North Carolina has the highest rate of income tax on the first taxable dollar. The rate is 6 percent. The silver medal goes to Minnesota at 5.35 percent and the bronze to Massachusetts at 5.25 percent. Oregon, Utah and Illinois are all worthy of mention at 5 percent.

North Carolina’s ranking is a legacy of the Democrats who had their way in Raleigh from the late 19th century to the end of last year.

I came across this factoid when I did my daughter’s 2012 income tax returns.

My daughter moved to Berkeley, Calif., in 2011, and last year was her first full year as a resident of California. She is a graduate student who has taxable income in the range of what a Wake County teacher’s assistant or a hospitality industry worker might make.

After completing my daughter’s California tax return, I wanted to see how much income tax she might have saved if she were still a resident of North Carolina. (Perhaps I wanted to lure her back home with the prospect of paying less in income taxes.)

I redid her return as if she had been a resident of North Carolina. Her state income tax bill here would have been about three times as much as the tax bill in California.

Even though I once was a professional tax preparer with H&R Block in Cary, this was a most unexpected result. I thought California, with its reputation as a high-tax state, surely would impose a heavier tax.

This led me to investigate the rates of taxes levied by other states and to discover that North Carolina has been squeezing the little guy the hardest.

Arguably, North Carolina Democrats have betrayed their natural constituency as it is the low- and modest-wage earners who are the bigger losers under the current income tax system.

Furthermore, high-income earners in North Carolina have fared relatively well under the Democrats as our top rate of 7.75 percent compares most favorably with California’s 12.3 percent.

The Republicans have proposed that our state adopt a flat, 5.95 percent income tax rate, which definitely appears to cater to their natural constituency by removing any element of progressivity to our income tax.

However, even if the GOP has its way, our income tax rate on that first taxable dollar would remain the highest in the United States.

Nine states get by without a state income tax, but I don’t expect North Carolina to join their ranks in my lifetime.

At 5.95 percent, North Carolina’s flat rate would be the highest among all states with flat income tax rates. The others range from 3.07 percent in Pennsylvania to 5.27 percent in Massachusetts.

We would be No. 1 again.

Democrat or Republican? Choose your poison.

Wouldn’t it be nice to be in the middle of the pack for a change?

Contributing columnist Marc Landry

of Cary can be reached at marclandry49@gmail.com.

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