When is a tax cut NOT REALLY a tax cut?
Answer: When you lower the rate, but monkey with the value of what is getting taxed.
This kind of thing happens a lot at the local level. Your county commissioners will claim they are holding the line on the property tax rate. That information will be trumpeted across the front pages of your local papers. What gets downplayed are the property valuations that unreasonably jack up the tax value of your property. (Kind of like when the tax assessor tries to convince you that your car or house or land is worth MORE at tax time than what you could possibly get for it in a private sales transaction.)
Let’s say the rate in your county is 55 cents per $100 in valuation. In 2013, the county says your property is worth $200,000. That’s $1100 in property tax. In 2014, they say your property is worth 225,000. The rate is still at 55 cents. Your tax bill — on THE SAME property — is now $1,237.50. You’re paying more, while the politicians are crowing about holding the line on taxes and protecting lil’ ol’ YOU.
We’re seeing this con game with the whole “gas tax cap” scenario in Raleigh. Proponents of the legislation are touting an immediate 1.5 cents per gallon cut in the state gas tax — which is, by the way, currently the highest in the south and one of the highest in the country. What gets downplayed is that the formula for calculating the gas tax will be “adjusted” in a manner that could keep you from seeing as much as 6 to 7 cents per gallon in savings on gas. (Maybe more.) *Watch my left hand. Pay no attention to what the right hand is doing.*
The honorables in Raleigh tooted their horns about cutting the state income tax to 5.8 percent, and then to 5.75 percent. What gets downplayed is that — with the deductions they’ve eliminated — your taxable income goes up.
After Obama told us that only the rich would see tax increases, and the conservative revolution promised us lower tax burdens, many taxpayers are getting the shock of their lives here at tax time:
[…] The new system was designed to be simpler by eliminating the tiered income tax rates that were pegged to income levels and lowering the rates for everyone to a flat 5.8 percent in the 2014 tax year and 5.75 percent this year. At the same time, it eliminated dozens of deductions and credits, including the earned income tax credit for the working poor and deductions for medical expenses, retirement income, child-care expenses and college 529 plans.
The impact of eliminating those deductions varies depending on taxpayers’ individual circumstances.
For example, losing the deduction for medical expenses is reverberating among seniors.
Murry Bubar was shocked this year when he did the taxes for his ex-wife, as he always does, and found that she owed $104 under the new system.
His ex-wife, Barbara Bubar, is 79, blind and lives in the Alzheimer’s unit of an assisted-living facility. Bubar’s income from savings and an annuity amounted to $9,300 last year.
“This is the first time in years she has had to pay any state taxes,” Bubar said. “Her medical bills are more than her income.”
Brandon Britt, who owns three Liberty Tax Service franchises in Johnston County, said many of his lower-income customers have just one question about their income taxes: “How much am I getting back?”
But this year many, of those customers are experiencing what Britt describes as “sticker shock” when it comes to their state taxes.
“A lot of the lower income people who were used to getting refunds of, say, $100, $200, $300 from the state of North Carolina are ending up owing the state of North Carolina $100 or $200,” Britt said. “I am seeing a larger percentage of my clientele owing the state of North Carolina than has happened in the past.”[…]
Indeed, there are undoubtedly taxpayers upset about the size of their refund, or the size of the check they’re writing when they file their taxes, who actually are paying less in total state income taxes than they did a year ago. But they don’t realize it because they haven’t factored in how much they had withheld from their paychecks during 2014 compared to 2013.
The new tax plan required people to fill out revised NC-4 withholding forms, the equivalent of the federal W-4. Many taxpayers found those new forms perplexing, in part because the new tax system eliminated personal exemptions as well as a number of tax credits that boosted the number of allowances taxpayers previously claimed.
So some people ended up not having enough withheld to avoid writing a check when they file their taxes.
“If your tax bill goes down by $100 but your withholding went down $200, your tax liability is $100 less, but you have to pay $100,” said David Hylton, tax director at accounting firm Carter in Charlotte.
At the same time, there certainly are disgruntled taxpayers – some of whom rail against the Republicans for changing the rules of the game – whose total tax liability is more under the new tax system.
State senator Bob Rucho (R-Mecklenburg) says people ought to be glad they are not getting refunds:
[…] “Why would they want to get refunds?” Rucho said. “That means they overpaid taxes to the government. … Why would you want the government to hold your money rather than you using it as you see fit?”
By lowering North Carolina’s income tax rate, “everybody has the opportunity to get more money in their paychecks,” Rucho said.
Still, some taxpayers might have higher tax bills because they made more money in 2014, Rucho said. Others might have benefited from tax deductions and credits that have been eliminated.
“If you have a special tax preference, that means everybody else has to pay a higher tax rate to pay for your special tax preference,” he said. “We’re trying to get out of that by having government not pick winners and losers, but to treat everyone the same.”[…]
Whaaaaaaaaa? (*screeeeeech*) Did I hear Big Bob correctly? Does this mean he will be a NO vote on Pat McCrory’s $45 million “NC Competes” corporate welfare bill?
Or on the tax breaks for electricity at data centers? Or on fuel for airlines?
6 thoughts on “When is a tax cut NOT REALLY a tax cut?”
Gee, last year I received a refund of $120. This year I need to pay Jones street $500. I am retired and my med bills were approximately the same as last year. My income increased by $2800 due to non taxable SS benefits. Seniors on fixed income it seems always get the short straw. If the guys on Jones street really want to tax everyone the same, then just eliminate the income tax entirely and institute a consumption tax on everything.
As for the fuel tax, screw me now or screw me later. Same goes for the $45 million bribe.
AMEN AMEN AMEN to abolishing the income tax and instituting a consumption tax. State wide AND nationally. ” We the people ” lost control of OUR gov’t in 1913 when the income tax code and the Federal Reserve were created.
We were a little concerned when the Haymaker exposed the scam that we elected officials use to screw the public and steal from them by keeping their tax rate the same and increasing the value of what we’re taxing them on. No tax increase here. The term we use to calm the sheeple is revenue neutral. It works everytime. Me and my buddies read the article and we said “Damn, now people will know how we’re cheating them”, but alas the sheeple they’ll line up in droves and vote for us again, they love a good screwing and not enough of them are paying attention to make a difference. Let the screwing continue. It’s for the chil-run and to create jobs don’t you know.
If the revenue neutral line doesn’t work and the sheeple start to grumble we just drop a few lines about Republicans being in charge and they calm down and fall right in line for another screwing next time around. Dumb as a rock and it always works.
Actually, Sen Rucho has a point: What’s the difference between giving the government YOUR money now or later? Maybe if enough people get worked up, NC will eliminate income tax altogether.
As for property tax, I don’t like it either. Property taxes are rent on property we think we own. If we don’t pay that rent, our landlord will kick us out. If we refuse to give up that property and defend it with force of arms, the government will spare no resource to remove or kill us. Property taxes are just as evil as any other tax.
Having said that, local governments as a whole don’t play as fast and loose with property values as one would think. They have to maintain sales studies to stay within a sales ratio (sales of properties vs. tax values of those properties.
Let’s take a stroll down memory lane.
When the Democrats where in charge does anyone remember ALL the republicans preaching about;
Tabor ,AFP tax pledge, contract with Amercia, government spending, incentives give aways, special interest. Etc.
Hmm only applies when your not in office. NC meet the new Republicans
Comments are closed.