New report: NC tax policy promotes racial inequities in numerous ways

A new report authored by Alexandra Sirota and Leila Pedersen of the North Carolina Budget & Tax Center analyzes who pays taxes in North Carolina and the ways in which our current tax code directly — and via the investments it supports — impacts Black, Indigenous, Latinx, and white residents.

Its unsurprising conclusion: North Carolina is not measuring up well. This is from the introduction to “State tax policy is not race neutral”:

The COVID-19 crisis has made clear that communities can experience the same events with disparate impacts along the lines of race, ethnicity, and income. Black, Indigenous, and Latinx communities and people with low incomes have been hit hard by the virus; these North Carolinians continue to experience higher death rates, more workplace safety risks, higher job losses, and greater income losses.

The health and economic disparities emerging from the pandemic are a cumulative result of inequities and barriers created by policy choices and a history of racism, bias, and discrimination. Policies and public institutions that limit access to education, quality jobs, and intergenerational wealth for communities of color continue to do harm and fuel racial and economic inequities today.

North Carolina’s tax code and budget are wrought with such policy choices, which can result in racist outcome that worsen barriers to well-being for people and communities of color, according to new data from the Institute on Taxation and Economic Policy (ITEP). The greater tax load carried by Black, Indigenous, and Latinx residents has been exacerbated by state tax policy choices made in 2013, which were layered on historic policy choices that set up a tax code structure that already asked for inequitable contributions from taxpayers of color. By analyzing the impact these policy choices have on different racial and ethnic groups, policymakers could gain clearer insight into the choices that are shaping (and harming) our lives and could make policy choices that advance more equitable outcomes.

This report analyzes the outcomes of who pays taxes in North Carolina and the ways in which our current tax code directly — and via the investments it supports — impacts Black, Indigenous, Latinx, and white residents. Each year, the foundation of our policymaking is often whether and how we will raise collective resources to advance our state’s well-being.

Tax policy, when designed with equity in mind, can support racial justice and sustainable economic growth that delivers broad-based benefits to all. The pandemic has made clear that North Carolina lawmakers can and must make intentional and sound policy choices that respond to the systemic causes of COVID-19’s disparities.

Click here to explore the report.

Some simple truths about the taxes corporations pay and Biden’s proposal blow the whistle on them

Hedrick Smith

[Editor’s note: The following essay was written by former New York Times Washington, DC bureau chief, frequent NC Policy Watch contributor and all-around legendary journalist, Hedrick Smith. It originally appeared on Smith’s own website, Reclaim the American Dream.]

WASHINGTON – Okay, let’s talk turkey about taxes and their implication for U.S. economic growth and inequality. But let’s get real. Let’s get beyond the political kabuki dance in Washington, with politicians echoing well-rehearsed lines. That means focusing on real-world economics.

Discovery No. 1 one is that almost no major U.S. corporation, certainly not those that do business overseas, actually pays the 21% corporate tax rate, set by law. In fact, on average, Fortune 500 companies pay about half that much – 11.3% according to the non-profit Institute for Taxation and Economic Policy and Taxation, working from corporate reports.

Federal Tax Data from the Center on Budget and Policy Priorities

The second big discovery is that despite endless whining from Corporate America about its unfair and impossibly heavy tax burden, corporate taxes and the corporate share of overall U.S. tax revenues has been shrinking over the past six decades, down sharply from 32% of the total in the 1950s to 7% in 2019. And the rest of us have to make up that difference.

Bragging to Wall Street, playing poor to IRS

Finally, to get how corporate tax games are played, you have to understand that U.S. corporations keep two sets of financial books – one for the public and the other for the taxman – and that’s legal under U.S. tax law.

The first set of books, shared with investors and the financial press, reports so-called “book income,” which is where companies cast their earnings in rosy terms and brag to Wall Street about how much money they made. The second set of books does the opposite. It’s filed in private to the I.R.S. and it seeks to shrink company profits to the bare minimum, to zero if possible, by using every conceivable tax loophole and deduction.

Last year, for example, 55 large US corporations, including FedEx, Nike, Duke Energy, Nucor, SalesForce, Archer-Daniels-Midland, Booz-Hamilton, and four dozen more paid zero federal corporate income taxes despite publicly reporting more than $40 billion in pre-tax profits, according to data mined by the Institute of Taxation and Economic Policy.

If these 55 U.S. corporations had paid the official 21% tax rate, they would have owed Uncle Sam $8.5 billion, but instead, they got $3.5 billion in tax rebates because they were awarded tax credits. And that’s just the tip of the iceberg.

Over the past decade or two, all the corporate giants have worked this game – Apple, Google, Coca-Cola, Pepsi, Caterpillar, General Electric, Goldman Sachs, Merck, Pfizer, you name it. Collectively Corporate America has avoided an estimated $100 billion a year in taxes, – potentially several hundred billion over several years according to one academic study cited by the Biden administration.

Apple tax dodge – “The double Irish with a Dutch sandwich”

“How do they do that?” you ask. “How do they get away with that?”

The answer lies in wonky accounting concepts like profit shifting and GILTI – spelled with an I not a Y. In the arcane idiom of tax law, GILTI literally stands for Global Intangible Low-Taxed Income, which is a fancy label for US corporate profits stashed away in overseas tax havens. Read more

NC Democratic legislators introduce sweeping election reform bills

Image: Adobe Stock

Rallying for election reforms, House Democrats unveiled a new bill entitled the “Fix Our Democracy Act” and highlighted a recently introduced measure designed to safeguard voting rights at a press conference Tuesday.

Rep. Marcia Morey, D-Durham, said the Safeguarding Voting Rights bill (HB 446) she’s co-sponsoring “gives no favor to any party” by focusing on four areas to ensure ease and accessibility for voting: voter registration and absentee/mail-in voting, recruitment of pollworkers, increasing flexibility for voting hours and the rights to vote during state holidays.

Rep. Marcia Morey, D-Durham

Morey stressed the importance of expanding mail-in voting. The bill would require the state Board of Elections to send out absentee ballot requests to every eligible voter with pre-paid postage at least 90 days before Election Day. The bill would make the one-witness requirement enacted temporarily by the General Assembly for the 2020 elections a permanent measure. The bill further requires at least one drop-off site in each county. Ballots postmarked by Election Day would still be counted if received no later than three days after the Election Day at 5 pm.

“My colleagues and myself strongly believe this is the time we encourage people to vote,” Morey said.She noted that  HB 446 seeks to make voting secure and easy and noted the many restrictive voting bills have been introduced across the country.

Rep. Ashton Clemmons, D-Guilford, previewed another new bill HB 542. She said the Fix our Democracy Act aims to fix our democracy “each person having an equal voice”

Rep. Ashton Clemmons, D-Guilford

Clemmons explained that the proposal builds upon House and Senate bills with the same name from 2019, by advancing a series of reforms in elections, redistricting, voting, campaign finance, lobbying and transparency. Neither of the 2019 bills made it out of their committees.

A Senate version of HB 542, SB 716 has also been introduced by Sen. Jeff Jackson, D-Mecklenburg.

Among the Fix Our Democracy Act’s provisions are:

Voting and redistricting

  • Online and automatic voter registration – The measure allows eligible citizens to register to vote automatically whenever they interact with government agencies, such as the DMV, unless they decline to do so. A voter purge would only be allowed when the nonforwarding postcard from the county board of commission was returned.
  • At least one polling place required on college campuses with over 4,500 enrolled students. Read more

Financial questions may doom a small Scotland County town

A small Scotland County town may become a spot on the map with no elected government or authority to collect taxes.

A state commission is recommending East Laurinburg be stripped of its charter after years of shaky finances.

The Local Government Commission, which operates within the state Treasurer’s Office, voted unanimously Tuesday on a resolution to recommend that the town of 300 lose its status as a municipality. Legislative action is required to revoke a charter, and state Treasurer Dale Folwell said he’d spoken to legislators who represent East Laurinburg.

The town has been on the Unit Assistance List for years, said Sharon Edmundson, director of the State and Local Finance Division in the Treasurer’s Office. The Unit Assistance List is a watch list the office keeps of towns, cities, and counties that don’t file audits on time or have other financial problems.

“They have not shown they are viable going forward,” she said. “We’ve struggled with them for years.” During one stretch of time,  state staff couldn’t figure out who the town’s finance officer was. “They wouldn’t return phone calls or anything.”

The commission also voted unanimously to take control over the finances of Pikeville, a Wayne County town of about 700 people.

The town spent more in 2019 from its general fund and utility funds than it had budgeted, according to information given the Local Government Commission. The town is facing debt payments in the coming months and “its financial position is impossible to determine,” said the resolution the commission approved.

School calendar flexibility gets nod in House Education Committee

A flood of bills granting school districts calendar flexibility received favorable hearings Tuesday from the House Education K-12 Committee.

Districts want the flexibility to start the school year earlier, one wants to start as early as August 1, and to close later to address learning loss due to the COVID-19 pandemic.

State law currently allows schools to start no earlier than the Monday closest to Aug. 26 and to end no later than the Friday closest to June 11. There are exceptions for some schools such as charter schools, year-round schools and low-performing schools.

Meanwhile, other schools want flexibility to align district calendars with community colleges calendars to aid high school students enrolled in college coursework.

House Bill 77 seeks calendar flexibility for Moore County Schools. It  would help the district to accommodate golf tournaments.

“What makes this different for Moore County is that we have major golf tournaments,” said Rep. James L. Boles, a Moore County Republican and bill cosponsor.

Moore County is home to the Pinehurst Resort and Country Club. The country club’s famous No.2 Course will host the U.S. Open in 2024.

School buses and parking lots are needed to host such events, Boles told the committee.

The school district usually receives exemptions every few years to accommodate major tournaments. HB 77 would give it permanent flexibility to adjust the calendar to adapt to them.

Support for the calendar bills was nearly unanimous. Rep. Frank Iler, a Brunswick County Republican, supports local calendar flexibility bills but voiced concern about those that apply statewide.

“Everyone is familiar with my attitude about the tourism industry and school calendar,” Iler said. “I think it should be labeled child abuse to send anybody back to school before Labor Day, and so, I’ll be abstaining or voting no on calendar bills.”

The state’s tourism industry has vigorously opposed allowing the school year to slip into months traditionally reserved for summer break. The N.C. Travel Industry Association wants families free during summer months to travel to state beaches, the mountains and attractions in between.

Louise Lee, founder and president of Save our Summers NC, a volunteer organization of parents, teachers and others who want to preserve a traditional school calendar, said lawmakers who spoke in favor of the calendar flexibility bills did so on behalf of superintendents and school boards.

“The piece that’s missing is who I’m representing; that is parents and teachers,” Lee said. “These people have been through enough this year without fighting once again just to preserve a somewhat traditional school calendar as a choice for families.”

Arguments to align school calendars to community college calendars and to set them up so students finish exams before winter breaks have been around for 17 years, Lee said.

“It is time to put these arguments to rest,” she said.

Rep. Donny Lambeth, a Forsyth County Republican, has filed a school calendar flexibility bill every year since 2013 when he began serving in the House.

“Those bills have never been heard,” Lambeth said.

He said the fact the bills received near-unanimous support in committee sends a message that the House supports allowing district officials to operate in a manner they believe is best for students.

Lambeth wants a list of schools operating on a traditional school calendar and one of the counties the bills will impact along with their school start and stop dates.

He also asked for a list of counties granted exceptions. Those include districts in the mountains that are allowed to start the school year early because they close frequently due to severe weather.

“I’d love to see all districts to give us a profile of where the state would look if we pass all of these bills through the House and Senate,” Lambeth said.