Every North Carolinian who pays state income tax would benefit from rate cuts tied to the state Senate’s latest budget plan. Why then do Gov. Roy Cooper and his left-of-center allies complain that the Senate is catering to millionaires and billionaires?

It’s a good question. Answering it requires a basic understanding of North Carolina’s flat-rate tax system.

Starting in 2014, the Republican-led General Assembly replaced the state’s old multitiered income tax with a single flat rate. At that time, the single rate (5.9%) was lower than the lowest rate (6%) in the old system. The initial flat rate fell 24% lower than the highest rate (7.75%) in the discarded system.

Despite dire warnings from left-of-center critics, the significant tax code transformation did not generate a drastic drop in state revenue. Money continued to flow into the state treasury at such an impressive rate that lawmakers continued to cut rates in future years.

Thanks to a state budget plan that secured widespread bipartisan support in 2021 — a 40-8 vote in the Senate and a 104-10 vote in the House — the income tax rate is scheduled to fall this year from 4.99% to 4.75%. It’s scheduled to fall to 4.6% in 2024. By 2027, the rate will stand at 3.99%.

Those rate cuts are built into existing state law. Despite today’s criticism, Cooper signed those tax reductions into law.

Both the state House and Senate support additional cuts. Under the Senate plan, the rate would dip to 4.5% in 2024. The Senate would like to speed up additional cuts. By the time its proposals take full effect, the rate would stand at 2.49% in 2030.

These rates would apply to any N.C. taxpayer who owes income tax. Nothing about the cuts targets millionaires or billionaires for special treatment.

Yes, those with higher incomes would save more dollars. But other elements within the state tax code ensure that those with higher incomes will continue to pay a larger portion of the state’s overall tax bill than those at the lower end of the scale.

Every taxpayer gets the benefit of a standard deduction. Deductions for children target those with low and middle incomes. Nothing about recently proposed rate cuts would change that fact.

Let’s compare families of four at several different income levels.

A standard deduction of $25,500 jumps to $27,700 for married couples filing jointly this year. Couples making less than $40,000 can claim a $3,000 deduction for each child. That means a family of four with an adjusted gross income of $33,700 will owe zero state income tax this year.

It’s impossible for lawmakers to give those families any additional income tax relief.

Since those at the lowest end of the income scale already owe no state income tax, we’ll start our comparison with a family of four earning $50,000. Let’s compare them to families of the same size earning $100,000, $200,000, and $1 million.

Given current standard deductions and child tax credits, the $50,000 household will owe state income tax of $821 this year. The effective tax rate is 1.6%. The $100,000 household owes $3,291 (an effective tax rate of almost 3.3%). The $200,000 household owes $8,184 (4.1% effective rate). The $1 million household owes $46,184 (4.6% effective rate).

Here’s an important caveat. All calculations are based on families using the standard deduction. If families at higher incomes benefit from other targeted tax breaks, critics should lobby against those breaks. They have nothing to do with the flat-rate tax.

Throw all of the tax assessments from our example together, and we see that our four families owe the state $58,480. The $1 million household foots about 79% of the bill, with the $200,000 household paying 14%, the $100,000 household 6%, and the $50,000 household less than 1.5%.

Note also that the $1 million household, which makes 20 times as much income as the $50,000 household, owes 56 times as much state income tax. Remember also that a household with up to $33,700 in income owes nothing.

What happens if rates drop to 2.49% as the Senate proposes? Barring any other changes in the standard deduction or child tax credit, the $50,000 household would owe $430 (0.9% effective rate). The $100,000 household would owe $1,725 (1.7% effective rate). The $200,000 household would owe $4,290 (2.1% effective rate). The $1 million household would owe $24,210 (2.4% effective rate).

Everyone sees a significant cut. But the highest-earning household still pays 56 times as much tax as the $50,000 household. That $1 million household still picks up 79% of the tab when combining the four families’ tax bills.

Whatever Cooper and his allies think about higher-earning households paying more income taxes, they shouldn’t mislead voters. Speeding up rate cuts does not mean a special break for “millionaires and billionaires.”

Mitch Kokai is senior political analyst at the John Locke Foundation.