Personal income tax cuts in NC are redistributing wealth to rich white people

Both chambers of the legislature in North Carolina recently introduced measures to extend and deepen tax cuts that have worsened racial wealth divides. Since 2013, the legislature has passed several rounds of cuts to the personal income tax that have overwhelmingly gone to wealthier North Carolinians.

Even without considering many ways tax changes in the past decade have reinforced racial divisions, flattening and reducing the personal income tax rate has diverted wealth into the bank accounts of affluent white taxpayers while people of color have seen less than their proportional share of the tax reductions.

A long history looms behind why white people got the lion’s share of the personal income tax cuts. Generations of public policy and private practice have created barriers to the kinds of jobs and wealth that it takes to get into the upper echelons of the income spectrum that received most of the tax cuts in the past decade. Educational segregation and underinvestment have kept many workers of color from getting the training they need to access the best paying jobs — divides that are reinforced by explicit and implicit racism in hiring and promotion. Moreover, many people at the top of the economic heap don’t get most of their income from working, but instead from investments based on wealth they inherited or already have. Barriers to home ownership and other opportunities to build wealth mean people of color are far less likely to start life with, or build, the assets that it really takes to get into the top income strata. Of course, many white families face barriers to better jobs and wealth, but generations of structural racism in how our economy is built mean these kinds of impediments weigh more heavily on communities of color. The result is that a seemingly race-neutral policy like cutting personal income taxes actively works to preserve the economic status quo and reinforce racial wealth divides.

Rich white taxpayers getting almost half of the tax cuts

The richest one-fifth of North Carolinians (with incomes over $127,000) will take home more than $5.3 billion this year in personal income tax cuts passed since 2013, which is more than everyone in outside the wealthiest 20 percent combined.

Barriers to upward income mobility facing people of color are the primary force driving the extent to which wealthier white taxpayers took home the biggest haul. Nearly half of white taxpayers are in the top 40 percent by income, which requires having an income over $77,800. Asian people are also over-represented in the upper income levels, but make up a much smaller share of the population so don’t drive the inequities in the overall tax shift. The upshot is white taxpayers with incomes over $127,000 got $3.5 billion more each year due to personal income tax cuts passedsince 2013 than all Black North Carolinians, and $4.7 billion more than all Hispanic North Carolinians.

White people got 3 out of every 4 dollars in personal income tax cuts

With so much of the tax cuts going to wealthy white taxpayers, white people in total got significantly more than their proportional share of the personal income tax cuts passed in North Carolina since 2013. White taxpayers got almost three-quarters of the personal income tax cuts since 2013, even though they submitted less than two-thirds of the North Carolina tax returns.

Black people got less than 15 percent of the cuts while accounting for over 22 percent of returns, and Hispanic people also submitted more of the returns than they saw in cuts.

Tax cuts in NC since 2013 have been even more racially lopsided impacts than this shows

As striking as these impacts are, they only sketch some outlines of how tax policy changes over the past decade have worked to preserve and deepen racial divides in economic opportunity and wealth.

This analysis doesn’t address the expansion of sales taxes, which force lower-income people to pay a larger share of their income in taxes, or how the drive to eliminate the corporate income tax mostly benefits white households that control over 90 percent of stock and mutual fund wealth, or how eliminating the Earned Income Tax Credit tossed out one of the most effective ways to target tax breaks to people who need them the most.

More profoundly, this picture doesn’t capture the missed opportunities to expand opportunity and address how generations of racial oppression continue to haunt families of color.

No matter what color we are or where we come from, we all need good schools, clean water, and other public services, and those kinds of investments are how we can rebuild our economy on fairer foundations for everyone. Personal income tax cuts not only divert funds into the pockets of wealthy white people, they rob us of the resources we need to build a more just and inclusive future for all of us.