2017 Fiscal Year State Budget, NC Budget and Tax Center

Remarks by Rep. Paul Luebke on the House budget

The full transcript of the remarks by Rep. Paul Luebke today during the House debate on the budget. (Watch his remarks beginning at the 16:30 mark.)

My concern looking at this bill is that it’s not placed in the proper context. And the context is the needs of the state and decisions that have been made in the last few years – particularly since 2013 – about taxes.

We all know you cannot have appropriations – you cannot have a budget – without taxes. And a lot of the times we have a tax that looks, for example, like the standard deduction this year in the tax bill. It is the “cost” – that is to say the reduction to availability – is $25 million. But the ballooning effect is there, and two years from now it reduces availability by $133 million. We are taking off the table a lot of revenue to meet the needs of the state. You might ask, “What are these needs? Haven’t we done everything in this budget that we could possibly do?” And the answer is, “No.”

While the budget does right by overall teachers, it doesn’t do anything for those teachers who are beginning. No one can really claim that $35,000 is an adequate income for a teacher. In fact, I have data that shows that if a teacher has a family at $35,000 that she or he is eligible for the Earned Income Tax Credit. That is to say that because of the low-income and family size there is, under that program – a program we all know, I think, was started by President Reagan and expanded by President Clinton – a teacher at $35,000 is eligible for the tax credit because the income isn’t sufficient.

Continued:

So, we could have been raising that more. State employees: 2%. Why not more than that? Why not a flat increase so that all state employees, in addition to the 2%, including custodians or higher level administrators, can have more income?

Rep. Insko talked about mental health programs. Surely no one in here thinks we’ve done enough for mental health problems.

And these are just a couple of examples of where the budget falls short. It falls short because of a commitment to a tax cut program that – really parts of it are not necessary. In the Finance Committee on Tuesday, I pointed out that under the tax bill we have right now – based on the 2013 tax bill – $400 million is given to the few millionaires in our state. $400 million. What could we do with an additional $400 million? How would that happen? All you have to do is bring the millionaire tax bracket back to where it was since 1991. The state did not fall apart because of that 7.75% bracket on millionaires.

We would have an additional $400 million on the table which we don’t. The effect of doing this is just really not recognized. No one talked about it yesterday. There’s an assumption, and it’s carried out in the way newspapers report it because they can only report on what’s being said, as if we have all the money we could possibly have to meet the needs of the stat and that we have met the needs of the state. And we haven’t for the reasons that I’ve talked about.

What are some of the things we did in those tax cuts? Besides over-refunding or giving back money to millionaires and other higher end people – without any discretion as to which corporations were needy and which were not – we’ve had huge tax cuts in the corporate income tax. $500 million according to data provided to me by Rep. Stam. Why? Why do this in an untargeted way and just give the money back to and taking it away from availability? And you just say “Well, it was their money.”  If we don’t have money from the citizens of our state and the corporations of our state, we can’t operate. We all know that. We just have in our tax policy – we are not talking about what it means in terms of availability. I think we need to be doing that.

Another example I give and that Rep. Johnson – we’ve been long time friends – she mentioned yesterday that we were moving towards the top in the Southeast. What that means is that we’re behind South Carolina. South Carolina? Over the decades North Carolina has already prided itself in being the leading state in the South. And as far as where we are in teacher salaries, why are we just comparing ourselves to the Southeast? North Carolina has always been an example of a progressive state that could pay its teachers better than most states. And we aren’t doing it. To aspire to be top in the Southeast, to me, simply it’s inadequate.

I do think that if we’re going to have tax cuts they should be directed toward people making less than $35,000, as an example, or $50,000. Those are people who need it, those are people who in many cases are living paycheck to paycheck. They have real needs and we’re not really addressing that with the standard deduction.

You say, “Why?” Well, because a lot of the standard deduction does go to people who make substantial chucks of money. Why is that? Because contrary to what most of us think, because of most of us in here itemize, if you don’t itemize you are benefitting from the standard deduction. And so the data shows that a substantial amount of beneficiaries of the standard deduction do in fact make more than $100,000. And that’s not really targeted in the way it ought to be. Whether you agree with the argument made by Rep. Martin in both in the finance committee and here on the floor, at least the discussion of 1%, $80 dollars mill machinery [sic?] is targeted. It’s a decision made to focus on a few companies and to me that makes some sense whether you agree or not.

What we’ve done is reduce availability far too much. And we don’t talk about it. The effect of the 2015 tax cuts, the 2013 tax cuts have a ballooning effect. They reduce availability much more now than in the years they were passed and I deeply believe that this is missing from the debate. Nobody wants to talk about taxes as if a budget can miraculously appear without taxes. Who benefits, who pays, ought to be one of the fundamental questions that we ask.

And while I know Rep. Stam may be telling me, reminding all of us, that when I was chair of the House Finance Committee there were increases in sales tax and, as he knows, no one fought the sales tax more strongly than I did. I lost out in the caucus on that point. And we did, as he knows, put some of the taxes towards people who did make more than $100,000 and $200,000 – we did that. And I would also note that if we’re going to talk about sales tax, where did the sales tax increase go last year? They went on services that were used disproportionately by low-income people. So when you say, “ I want to reduce the income tax and will increase the sales tax,” you need to look at who was hurt by those increases. Labor in the auto repair shop, to tax that, well, it’s just really clear it’s going to hit more people with old cars who need repairs. And that’s not people purchasing Lexuses and Mercedes Benzes.

I’m just giving some examples – It’s not an exhaustive list of our tax policy, but it is saying that we’ve made a mistake. And I wish, for one, that we could correct it because by getting rid of some of the excessive tax cuts, especially the individuals about $1 million and to corporations untargeted, we just eliminate a lot that we could be doing. I come back to teacher salaries, I come back to – which I haven’t mentioned yet –benefits for school systems.  Ours is one of the faster growing states – to say that we’re back to where we were at a budget or that we have a higher budget than we’ve had doesn’t address affect how much we’re growing as a state or what the needs of our state are. The elderly population is increasing – what are we doing to focus on that area?

These are just illustrations that reflected my concerns that with this debate people are afraid to talk about taxes. I want to offer these remarks as a way to say, “We do not have tax fairness in this state.” The various tax cuts were not fair to people on the lower end, they were excessive for people on the upper end.  I just hope we’ll all think about that as we debate the budget and recognize that we could have done more – not just as a general statement, “We could have done more,” but that there would have been money there to address these problems that are left unaddressed in the budget.

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