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March 28, 2008

Who pays taxes in North Carolina?

We hear a lot of numbers about what percent of their income different households pay to the federal government for federal taxes, but let's bring these numbers closer to home. What do the latest numbers show for taxes paid to North Carolina? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We have a new study that does this, and we want to emphasize what we're looking at here is percent of income paid in taxes, not the dollars you pay in taxes but how much out of your income in percentage terms do you pay in taxes? And what you find is that it differs by the type of tax. For the sales tax where the tax rate, of course, is flat, everyone pays the same percent, low-income households on average pay about 6 percent of their income for the North Carolina sales tax. On the other hand, higher-income households because they save and invest a much higher percentage of their income, they end up paying only 1 percent of their income for the North Carolina sales tax. A similar result for the property tax; low-income households end up paying about 4 percent of their income in the property tax; high-income households, about 1 percent. For the state income tax, where the tax rate does actually increase with income, here you see the reverse. Here you see that the lowest income household pays only about 1 percent of their income for the North Carolina income tax, whereas the highest income household pays about 6 percent. And then what if we combine all taxes, what result do you get? Here we find that low-income households in North Carolina pay about 11 percent of their income for taxes of all kinds in North Carolina. Highest income households pay about 7 percent."

Posted by Dave at March 28, 2008 02:51 PM