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Some North Carolina lawmakers may push to eliminate the state’s capital gains tax under the guise of promoting economic growth, according to a recent report by the North Carolina Budget and Tax Center. The tax is levied on income from the sale of stocks, artwork, vacation homes, and other fancy items – so this isn’t a middle class tax cut we’re talking about. ITEP crunched the numbers for the report and found that eliminating taxes on capital gains would reduce state revenue by $520 million, and 60 percent of the benefits would accrue to taxpayers making $1 million or more – just one percent of North Carolina’s taxpayer base. The idea is even more appalling when you consider that all income growth in the state between 2009 and 2012 went to these same earners, according to the Economic Policy Institute.
Leaders of both parties unveiled tax cut plans last week in Minnesota, but the beneficiaries of these plans would differ greatly. Gov. Mark Dayton wants to introduce a tax credit for child care expenses that would expand an already existing program to cover families making up to $124,000 a year. Under the plan, which would cost $100 million over two years, the maximum credit would be $2,100, and the governor predicts that the typical family would receive a credit of $481. Meanwhile, state Sen. David Senjem has sponsored a bill to phase out Minnesota’s tax on some Social Security benefits over the next decade. The lion’s share of this tax cut would go to better-off elderly taxpayers, since social security is already fully exempt from Minnesota tax for seniors with income below $25,000 ($32,000 for married couples) and partially exempt for all seniors. His plan would cost $127 million over two years..
Mississippi Gov. Phil Bryant pledged to consider any tax cut proposal that reaches his desk in last week’s state of the state address, saying “In short, put a tax cut on my desk, and I will sign it.” The governor has proposed a nonrefundable earned income tax credit for working families with income limits that match the federal EITC.. The governor claims the credit would give Mississippians a tax break of $100-400 a year, would cost $79 million, and would only be available in years where revenue growth is sufficient and the state’s rainy day fund is full. An ITEP analysis found that the governor’s nonrefundable EITC proposal would give a tax break to only 9 percent of the poorest Mississippians, but a refundable credit would reach 45 percent of low-income people. Not everyone in the state is enthused by the governor’s plan; one legislator called the cuts “political hogwash” and blasted the governor for not investing more in infrastructure. The Sun Herald criticized the governor for unfounded optimism in his speech, writing “At the risk of reveling in the bad, as Bryant put it, we believe no honest State of the State at this point in its history should sugarcoat this state's miserable rankings in the education of its children, the health of its residents and the income level of its work force.”
State of the State Addresses This Week:
Hawaii Gov. David Ige (watch here)
Montana Gov. Steve Bullock (Wednesday)
Utah Gov. Gary Herbert (Wednesday)
Governors’ Budgets Released This Week
Arkansas Gov. Asa Hutchinson (Tuesday)
Minnesota Gov. Mark Dayton (Tuesday)
Wisconsin Gov. Scott Walker (Tuesday)
Massachusetts Gov. Charlie Baker (Wednesday)