Carolina Journal – Note: This column was updated at 3:40 p.m.
Children represent more than just an investment. But tax systems usually recognize that parents with kids are investing in the future.
And proposed changes in North Carolina’s income tax system would ensure that working-class and middle-class families free more money from the tax man because of that investment.
It’s attracted little attention so far in the income tax debate. But a provision in the N.C. Senate’s latest tax plan (Senate Bill 325) would provide more benefits to parents making up to $120,000 per year.
Let’s return to a recent debate about the progressive nature of North Carolina’s flat tax.
One of the state’s leading political columnists has argued that North Carolina’s income tax had been based historically on the idea that a bank president should pay taxes at a higher rate than a bank teller. He then proceeded to argue that North Carolina’s conversion in 2013 from a three-tiered progressive income tax to a flat-rate tax represented a significant deviation from that historical principle.
That argument is wrong. Large-scale increases in the standard deduction — or zero tax bracket, if you prefer — ensure that the bank president continues to pay a higher effective tax rate than the teller.
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