North Carolina Democrats seek new revenue from millionaires to fund public schools

As K-12 schools in North Carolina wait for state lawmakers to pass a new state budget to provide them with funding, teachers, parents and students are marching in the streets for better teacher pay and increased staffing, and some school districts have had to resort to layoffs and hiring freezes to get by. Some have closed their doors entirely.

To address the lack of funding and to raise money for a state public school system that advocates say has been underfunded for years, Democrats in the North Carolina General Assembly have introduced bills that its sponsors say will require wealthy residents of the state to contribute their fair share.

Senate Bill 1016 and House Bill 1073 were filed in their respective chambers in late April. The bills, which are identical, would assess a 7% tax on annual individual income over $1 million and distribute the revenue to the State Public School Fund.

There’s a crisis unfolding in North Carolina’s public school system, Rep. Allen Buansi, an Orange County Democrat who sponsored the House legislation, said in a May press conference. He pointed to the billions of dollars in needed school repairs across the state, as well as North Carolina’s standing among the lowest-ranked states in the nation for teacher pay and the lowest-ranked in per-pupil funding.

“This is not about broad tax increases,” Buansi said. “It is a targeted adjustment that reflects the reality that those who have benefited the most in our economy can, and should, contribute more to sustaining it. At the end of the day, this is about making sure North Carolina has the resources to meet its obligations to our workforce, to our children, and to our future.”

The bills were sent to committee, where they await a hearing. If the Legislature approves either bill and Gov. Josh Stein signs it into law, North Carolina will join Massachusetts, Washington, and Maine in enacting an income tax on millionaires for public school funding.

The North Carolina legislation would impact only 1% of the highest-earning North Carolinians, according to the North Carolina Budget and Tax Center, and generate $1 billion annually for schools. The proposal has received the backing of Patriotic Millionaires, a nationwide group of Americans with high net worth that advocates for equitable tax policy.

“The reason we believe a surtax of 7% on a million dollars, which is $70,000 relative to a person making a million dollars a year, is not going to hurt their third home or their fourth home or their individual investments,” Jacob Brooks, who leads on-the-ground work for Patriotic Millionaires, told the North Carolina Independent. “They are still going to be able to enjoy the fruits of their labor, and then some, because to whom much is given, much is expected, and we can’t keep relying on working-class folks and poor folks in this country to fund the bills when we are not asking the most wealthy among us to do the same thing.”

Tamika Walker Kelly, president of the North Carolina Association of Educators, the state’s public school employees union, told the North Carolina Independent that some educators have had to leave the North Carolina school system to find higher-paid work in neighboring states. One colleague who previously worked in Whiteville is now in South Carolina making an extra $10,000 a year, she said, and another who moved from Buncombe County to Virginia received a similar pay bump.

“All of them attribute their moves to how not only North Carolina does not pay its educators well, but what the biggest thing is is the lack of respect for the profession here in the state,” Walker Kelly said.

If the millionaire tax legislation were to become law, Walker Kelly said, the extra investment in public school students and educators would lead to better outcomes for public school students and educators, particularly in rural communities in Western North Carolina, where there isn’t the tax base to support the same level of funding found in more urban areas.

Still, Walker Kelly said, the loss of quality educators should be of grave importance to everyone in the state, regardless of their background.

“From the cashier at your grocery store to the doctor that you go see as your primary care physician, to the gentleman that fixes your HVAC system, many of those individuals have matriculated through our public school systems,” Walker Kelly said. “Our public schools really are the heartbeat and support system of everyday life in North Carolina, and so when we are talking about investing in our public schools, we’re not just talking about investing presently, right now, in the students that are sitting in classrooms every single day, but we’re talking about not investing in the future of our state, for it to be productive continuously from generation to generation.”

While lawmakers consider passing a new tax on millionaires, North Carolina Democrats are also asking large corporations to chip in more for public education.

In 2021, Republicans in the North Carolina General Assembly passed legislation that would gradually reduce the state’s corporate income tax each year, beginning in 2025, until it reaches 0% in 2030. Senate Bill 943, which Democratic state Sen. Kandie Smith introduced on April 29, would repeal the scheduled phaseout of the corporate income tax and raise the current 2% rate to 5%, putting North Carolina on par with neighboring states and generating billions of dollars for public schools.

“I think that these measures that have been introduced to the General Assembly really signal that we need to be asking corporations, the wealthy, to really take a look at what they can invest into our communities and being good stewards, good citizens for all of us, and not just for some of us,” Walker Kelly said.