NC Budget and Tax Center

Three important ways in which President Trump’s proposed budget shifts costs to North Carolina

On the heels of a federal tax plan that provides tax breaks to the wealthy, foreign investors and profitable corporations, President Trump has released a budget that will make it more difficult for people to get back to work and strengthen their quality of life and ensure thriving communities.

It is unlikely that North Carolina will be able to absorb these federal cuts and, in so doing, ensure that North Carolinians aren’t hurt by them.

North Carolina has scheduled another $900 million in tax cuts to begin on Jan. 1, 2019, and already has identified the need to prioritize class-size reductions, pre-Kindergarten for 4-year-olds, and ensure seniors have health care and food, among others.  Additional needs generated by the failure of the President and Congress to truly connect people to opportunity will not be met with resources under the current tax code.

Here are just three ways in which the President’s budget will push costs to the states:

  • The budget would slash funding for Medicaid and marketplace subsidies that help low- and moderate-income people buy coverage. It would repeal the Affordable Care Act (ACA), including Medicaid expansion and the marketplace subsidies, and replace them with a vastly inadequate block grant to states that would provide hundreds of billions less funding and would not adjust for unexpected costs. Two million North Carolinians access health care through Medicaid.  The cost of increasing the number of uninsured will either need to be addressed through state funding for health care or be borne by hospitals through charity care.
  • President Trump’s budget also would shift new costs to states by sharply cutting funding for other federal programs that help the poorest families stabilize their lives and get ahead.  For instance, the budget would slash funding for the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), by a stunning $213 billion (or nearly 30 percent) over the next 10 years. The budget also eliminates Community Development Block Grants and Social Services Block Grants, taking away billions of dollars that states and localities use to build stronger communities.  It also cuts funding for the Temporary Assistance for Needy Families (TANF) program, dollars that are currently being used to fund NC Pre-K.
  • The budget also would sharply reduce funding for the part of the federal budget that includes most other forms of federal aid to states – the “non-defense discretionary” (NDD) part of the budget.  This includes funding for a wide range of state and local programs including schools, child care assistance, water treatment plant construction, police and fire departments, and much more. By 2028, funding for non-defense discretionary programs would fall 42 percent below the 2017 level, after adjusting for inflation, again shifting huge new costs to states and localities. The budget also calls for deep cuts in specific NDD programs delivered by states and localities.  For instance, it eliminates the Low Income Home Energy Assistance Program (LIHEAP), which helps millions of low-income seniors, disabled people, and others in need pay their home energy bill. Nearly 200,000 North Carolinians currently receive assistance with their energy bill through LIHEAP.

Federal funds represent nearly one-third of public dollars invested in North Carolina programs and services. Proposed reductions will place new barriers in the way of our state’s full recovery and stymie efforts to strengthen economic mobility.

The President’s budget, even if unlikely to pass in totality, signals an urgent need for state policymakers to begin planning for the loss of federal funds.  They can start by ensuring that our state tax code is able to meet the needs in our communities and stop future scheduled tax cuts.

One Comment

  1. Timothy C. Melton

    February 15, 2018 at 10:06 am

    May I suggest that NC Legislators consider making Marijuana legal for adults in this great state. This would be a “win-win.” The police departments and courthouse personnel would see a significant reduction in their workloads. The jails would save millions. The tax revenues from the sell of Marijuana could be used to fund the above mentioned issues. Ask yourself this question. Has the lottery money raised by North Carolina been useful?

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