The state Senate is up to its old fiscal policy tricks again. Last year, Senate leaders forced through a large tax cut for upper income households and had to be dragged kicking and screaming to agree to a microscopic earned income tax credit for low income people. This year, the House hasn't even completed work on the budget and Senate leaders are already firing new and regressive shots across the bow.
A case in point was yesterday's 46-0 vote to repeal the state gift tax. While it's true that North Carolina is one of only a handful of state's to maintain such a tax on the books, the timing of the proposed $18 million cut (at a point in which the state budget margin is razor thin and such critical areas as MH/DD/SA and probation services are horrendously underfunded) is hard to fathom. Of all times to be cutting taxes on the rich!!
Another hidden aspect of the cut is its likely impact on the current estate tax. With the demise of the gift tax, the wealthy will have more incentive than ever before to frontload their giving so as to avoid the estate tax when they die. This almost certainly means an even greater revenue reduction than is immediately evident in the gift tax cut itself. All in all: a regressive, shortsighted and all around terrible move at a terrible time.
The N.C. Budget and Tax Center plans to release some additional analysis on the Senate's action later today. Let's hope the House reviews it carefully. Be sure to check back at NC Policy Watch and The Progressive Pulse for more details.
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