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When Facts Get In the Way: State budget’s tax cuts benefit wealthy, corporations at expense of moderate- and low-income families

Who benefited most from the 2011-13 state budget’s tax and spending cuts? Certainly not working North Carolina families, counter to claims made by a video from Americans for Prosperity and Civitas. The video states that legislators both cut taxes for working North Carolinians and balanced the budget. The Budget and Tax Center has already disputed the truth of the video’s claim to add 2,000 teachers to North Carolina’s public schools despite massive tax and spending cuts.
Instead of mending North Carolina’s outdated tax systems, policymakers made tax cuts in the budget that disproportionately benefited the wealthiest North Carolinians and businesses at great expense to public structures necessary to moderate- and low-income families; teachers in classrooms, health care for the elderly, a strong court system, and infrastructure for businesses and communities.
  • Discontinuing the higher personal income tax surcharge and the tax surcharge on profitable corporations put $200 million per year into the pockets of the wealthiest North Carolinians and largest corporations, but did not benefit North Carolina families – working or not – of more modest means.
  • Legislative leaders gave away more than $467 million over the biennium to businesses in the form of a $50,000 business tax exemption. This exemption does not come with any requirements, such as job creation, and as a result is highly unlikely to make a dent in North Carolina’s persistently high unemployment rate.
Beyond the budget bill itself, legislators continue to press for changes to state corporate tax law that would make it even easier for multi-state corporations to shift profits earned in North Carolina to other states and counties in order to avoid paying state taxes. The changes sought by industry groups representing these corporate taxpayers could cost North Carolina’s public schools, community colleges, and courts hundreds of millions of dollars.
By undermining revenue availability in these ways, North Carolina policymakers put the state budget in a precarious fiscal position while taking no action to improve the revenue system’s equity or adequacy to support a stronger state for all.So while you may have heard about a revenue “surplus”, don’t believe it. It’s still far too early to declare a state revenue surplus (which is revenue collections over projections at the close of the fiscal year, in June) and even more unrealistic to assume that some economic improvement short of major gains in statewide employment will be enough to mend this unbalanced budget. Revenue collections ahead of target are not the same as a revenue surplus. Even if it was, the $140 million ahead of target at current time isn’t even enough to meet current-year obligations, let alone increase availability for next year’s budget.

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