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North Carolina Taxpayers Report Leaner State Returns in 2015

PHOTO: North Carolinians are reporting a reduction in their state tax refund, or in some cases, a higher tax bill after the state eliminated tax credits. Photo credit: Jane M. Swayer/Morguefile.
PHOTO: North Carolinians are reporting a reduction in their state tax refund, or in some cases, a higher tax bill after the state eliminated tax credits. Photo credit: Jane M. Swayer/Morguefile.
March 19, 2015

RALEIGH, N.C. - If you're among the North Carolinians who have already filed your taxes, you may have noticed your state tax burden is a little greater this year.

Greg Elder, a Spruce Pine tax preparer for H & R Block, says the state's decision to eliminate tax credits like the earned-income tax credit (EITC) from the tax system is impacting the budgets of his clients.

"Most people, it boils down to a smaller North Carolina refund than they've received in the past," says Elder. "If you're making a plan prior to getting your taxes done that you're going to use your North Carolina refund, don't go buy that refrigerator just yet."

The new system eliminated the tiered income tax rates that were tied to income levels, setting the tax rate at 5.8 percent for 2014, and 5.75 for this year. The tax changes are the result of a tax overhaul passed in 2013 and put into effect for the 2014 tax year.

Alexandra Sirota, director of the NC Budget and Tax Center, says while her organization doesn't take issue with the necessity of taxes, her analysis indicates the new tax model disproportionately impacts the working class.

"The key thing about a tax system is it absolutely has to be adequate to meet the core public service commitments that we need to be making as a state," says Sirota. "But the way in which we raise revenue is really critical."

Sirota says taxpayers making less than $67,000 a year - about 80 percent of the state - will see their taxes increase under the tax plan. Even with that, the Institute on Taxation and Economic Policy estimates state tax revenue will be down by about $1 billion by the end of this year because of an overall reduction in corporate taxes.

Elder says while a tax refund is never a guarantee, the abrupt change in the state tax system is leaving many of his clients without a much-needed boost this spring.

"People do count on that money," he says. "It's been similar for years and years and years, so they had no reason to think that it wouldn't be for tax year 2014."

In addition to the EITC, deductions for medical expenses, retirement income, child care expenses and college 529 plans also were eliminated.

Stephanie Carson, Public News Service - NC