It’s time for a millionaires tax in North Carolina

For more than a decade, NC legislative leaders have handed out income tax breaks for the wealthiest few while neglecting the well-being of everyone in our state.   

Now, the US Congress plans to extend a 2017 federal tax law that would hand even more benefits to the richest few, while hundreds of thousands of North Carolinians face the loss of health care and food assistance, as well as rising costs. 

North Carolina state leaders will soon have a choice: Will they accept the harm being forced on our communities and slash essential services? Or will they step up to protect people’s health, stability, and financial well-being?  

So far, signs point in the wrong direction.  

Some state lawmakers have introduced proposals this session that suggest the legislative majority is willing to embrace plans that take health care away from North Carolinians. Legislators in both the House and Senate introduced proposals that fast-track Medicaid work reporting requirements — an unnecessary and punitive measure that could strip health care from up to an estimated 496,000 in NC as soon as federal law allows. These proposals push the state’s Department of Health and Human Services (DHHS) to begin planning for the implementation of Medicaid work reporting requirements on an expedited timeline, requiring DHHS to notify the legislature of the funding necessary for implementation within 30 days of approval by the Center for Medicaid Services.  

But there is another path, and we must demand that state legislative leaders take it for the health and well-being of us all.  

Our state legislators should be unwilling to accept a future where more North Carolinians are uninsured, sick, and hungry.  They must recognize that when federal leaders walk away from their responsibilities, the consequences fall on states like North Carolina. And state lawmakers have the tools to respond.

Here’s one simple step for them to take: They can establish a higher income tax rate on incomes over $1 million.

A millionaire’s tax at 7 percent on incomes over $1 million — a rate still lower than the highest rates pre-2013 — would provide more than $980 million in additional revenue every year. That revenue could protect North Carolinians from harmful federal cuts.   

Right now, North Carolina uses a flat income tax rate — the same rate for someone living in poverty and a millionaire. The flat income tax rate means the richest would receive the biggest windfall from any future tax cuts.   

In contrast, adopting a higher rate on higher incomes wouldn’t impact the rate paid by the vast majority of North Carolinians, and even millionaires would still pay the lower rate on their first $1 million in annual income. That’s how graduated income tax rate schedules work to ensure fairness and adequacy — necessary functions of a tax code that provides funding for the health care, child care, housing, and education that delivers better outcomes for people and a stronger economy. 

As Congressional leaders push for more federal tax breaks for the rich — shifting the costs of essential programs onto states — everyday North Carolinians will be expected to pick up the slack. Estimates of the tax break from the US House package find that the richest 1 percent of North Carolinians, whose annual income averages about $1.9 million, would receive an average annual tax cut of nearly $65,000 (3.5 percent of their income), a disproportionately larger cut relative to that received by the worst-paid North Carolinians, who would receive a tax cut of just $80 (just 0.6 percent of their annual income).

At the state level in the NC General Assembly, the Senate has signaled where they stand.  Rather than fight for the well-being of every North Carolinian and keep costs low for us all, they would continue to cut taxes for millionaires.  In their budget proposal, the NC Senate proposes reducing the personal income tax rate to 1.99 percent as soon as 2031 if certain revenue triggers are met.  To be clear, for more than a decade, millionaires have reaped significant benefits from state income tax cuts and, once again, they would reap the lion’s share of this latest state income tax cut.

According to the Institute on Taxation and Economic Policy, this NC Senate proposal alone would deliver an additional average annual tax cut of $64,700 to millionaires in North Carolina, on top of their federal tax cuts and more than a decade of state cuts. This is more than 52 times the average amount received by non-millionaires, who would see roughly $1,200.

At a time when so much is at stake for our communities, it’s time to call on our leaders to make sure the wealthy pay what they truly owe. State leaders can protect North Carolinians from the losses Congress is proposing by implementing a millionaire’s tax now.   

A budget that hands out more tax breaks to millionaires at a time when essential federal supports are being dismantled isn’t just short-sighted — it’s dangerous. 

North Carolina needs a better plan than what NC Senate leaders are offering us. When lawmakers choose people over profits, our state can build a future where everyone has the freedom and opportunity to thrive.