During the budget debate earlier this week, North Carolina Senators did not approve an amendment that would cap a $336 million tax break for businesses, both small and large. Unrestricted business tax breaks like this benefit many North Carolinians who are already doing very well at the expense of struggling families. Lawmakers should consider policies that build a strong middle class and safety net for the least well off, especially considering research shows these groups were devastated by the recession.
Consider the Federal Reserve study released earlier this week that found the wealth gap increased from 2007 to 2010. The net worth—which is total assets minus total liabilities—of the median American household fell from $126,000 to $77,300, or by nearly 40 percent, to levels last seen two decades ago. Every income group experienced a decline in net worth except for the top 10 percent, as illustrated in the chart below. The middle class experienced the largest drops in net worth over the three-year period.
Chad Stone, Chief Economist at The Center on Budget and Policy Priorities, took a closer look at the data released by the Federal Reserve and found that not only is the wealth gap growing but wealth was more concentrated than income in 2010: the top 10 percent of households (ranked by wealth) held 75 percent of the wealth whereas the top 10 percent of households (ranked by income) hold 45 percent of income. And while median income continues to fall for most income groups, the share of income held by the top 1 percent rose in 2010.
North Carolinians are contending with widespread income inequality, a lower-than-average economic mobility rate, and high rates of poverty and asset poverty. As such, lawmakers have a lot to consider when they iron out the differences between the House and Senate budget proposals. The final budget should be designed to put North Carolina on a sustainable path rather than exacerbate inequalities so that everyone can enjoy the benefit of prosperity.