Sales taxes are regressive. They take a larger percentage of money from low income families than they do higher income families. That’s why liberals in North Carolina howled when the Republicans running the legislature reduced the income tax rate on the highest earners and replaced it with a sales tax on services.
Today, the results are clear. Poorer North Carolinians are paying a larger percentage of their income to the government than richer ones. According to a study by The Square Center, the top one percent here pay an effective rate of 6.4% while the middle 20% pay 9.4%. Republicans call the flat tax they implemented “fair” because everybody pays the same rate, but that’s misleading. The sales tax insures that the rich pay a lower percentage of their income in taxes while the poor pay more.
It’s not just in North Carolina. We’ve seen this trend in federal taxation going back to Reagan. Republicans, with the help of Democrats at times, have reduced the top marginal tax rate and capital gains taxes to shift the burden from the wealthy to the middle class. Today, the richest people in America pay a lower tax rate than the bottom 50%.
At the same time we’ve seen the tax rate plummet for the wealthy at the state and federal level, Republicans cut services to the people who struggle the most. Before Republicans took control of the legislature in North Carolina, they complained that Democrats’ warning that Republicans would cut education were little more than scare tactics. Now that the GOP is firmly entrenched, they’ve significantly cut the budget to our university system and they’ve reduced per pupil spending dramatically.
Nationally, Republicans have slashed taxes for the rich and paid for it with record deficits and debt. To pay it down, they now want to cut Medicare and Social Security, the lifelines for many working and middle class seniors and retirees. The GOP likes to claim that their tax cuts spur the economy, but there’s little proof of that. Instead, they’ve just shifted the tax burden, putting more money in the pockets of people who are already doing just fine.
Nothing distinguishes between Republicans and Democrats more than tax policy. The GOP believes that if the rich are paying less, then everybody else will benefit. Democrats believe that if working and middle class families have more money, the country will flourish. Republicans have won the argument nationally for the past 40 years. In North Carolina, they’ve won for the past decade. Today, we have Donald Trump as president and massive income inequality. Maybe it’s time to try something else.
Thomas Mills is the founder and publisher of PoliticsNC.com. Before beginning PoliticsNC, Mills spent 20 years as a political and public affairs consultant.
