NC Budget and Tax Center, Trump Administration

Coverage losses, cost shifts to North Carolina could result from US House vote today on health care coverage

The U.S. House of Representatives is set to vote on the American Health Care Act today which seeks to strip the health care coverage extended to millions of Americans in recent years, shift the cost of health care onto middle and low income consumers and give the wealthiest taxpayers a tax cut.

It has been called by many the greatest redistribution upward in memory.

It is also a cost shift onto states.  North Carolina policymakers would have to find an estimated $6.6 billion over 10 years to maintain the Medicaid program alone.  To do so, state policymakers will have to raise taxes or cut services or cut off people from health care or cut payments to providers.  At a time when North Carolina’s leaders are contemplating their existing spending priorities with a tax code that continues to fall short of the needs, finding an additional $6.6 billion over ten years will be impossible without many of these steps.

The proposed restructuring of Medicaid represents unnecessary changes to a program that serves the state’s most vulnerable residents efficiently and with the goal of improving health outcomes of all North Carolinians.  This is a retreat by the federal government that will leave state policymakers responsible for the rationing of care and fallout from the health care industry.

Over time, as my colleague Luis Toledo detailed in recent analysis, these pressures on state government will grow.  The adjustment of the amount that the federal government will provide to North Carolina is not sufficient to keep up with the cost of services nor will it allow the state to contend with the next public health crisis or emerging treatments for existing diseases.

The loss of health care coverage through the dismantling of the Affordable Care Act and the restructuring of Medicaid will ripple through North Carolina, impacting families, health care providers and, yes, the economy.

NC Budget and Tax Center

Four big problems with the NC Senate’s latest tax cut proposal

Senate leaders announced last week that they will file a “Billion Dollar Middle Class Tax Cut Act,” which is misnamed. It will actually continue to deliver the greatest tax breaks to wealthy taxpayers and profitable corporations and drive North Carolina ever closer to a zero income tax. The result will likely be a combination of underfunding needed public services in communities across the state and shifting the tax load to low- and middle-income taxpayers through increased sales and property taxes down the line. Here are four huge problems with the proposal:

1. Another $1 billion less in revenue makes it impossible to budget responsibly

The Senate proposes another $1 billion in tax cuts that will be paid for in cuts to public services. Importantly, the legislature’s Fiscal Research Division has already identified $680 million in immediate budget pressures—growing student enrollment in public schools and universities, health care costs, etc—for the next fiscal year. This does not include the well-documented need for the state to support rebuilding efforts in eastern North Carolina in the aftermath of Hurricane Matthew, nor the stated bipartisan priorities to invest in various unmet needs in the courts, mental health and other public service areas.

2. Eighty percent of the net tax cut since 2013 will have gone to the top 20 percent of taxpayers.

The cumulative change in taxes for North Carolina taxpayers will mean that the majority of the net tax cut since 2013, a full 80 percent, goes to the top 20 percent of taxpayers. If this proposal moves forward, a millionaire in North Carolina will have received an average annual tax cut of $20,000, while only a third of taxpayers who earn less than $20,000 would get anything. Taking all tax changes since 2013 into account, people who earn less than $20,000 would receive an average tax cut of $15 under this proposal.

3. Two-thirds of taxpayers in the bottom 20 percent of taxpayers receive no tax cut.

Senate leaders released misleading figures that seem to imply that some of the state’s counties with the highest poverty rates would see the largest tax cuts, but that’s simply not true. The major tax policies proposed in the Senate plan do not target low-income households or communities. These policies seek to exempt more income from taxation, lower the rate on income that is taxed, and uncap itemized deductions claimed by a very few and wealthy taxpayers. Most importantly, these income tax policies do not address the reality that many low-income taxpayers contribute through sales tax and do not have sufficient income to benefit from increasing the standard deduction or a Child Tax Credit that is not refundable. Fully two-thirds of the taxpayers with income below $20,000 a year will receive no tax cut from the Senate’s proposal.

4. Rural communities will continue to be hurt by the Senate tax cut proposal.

Not only will rural communities continue to be among the hardest hit from the loss of state revenue (many infrastructure, economic development and educational investments made by the state are not possible under current austerity policymaking), most rural North Carolinians would see little to no change in their tax payments. Tax returns reporting adjusted gross income over $100,000 and who are likely therefore to be among those receiving the vast majority of the benefits from the tax changes since 2013 are more concentrated in urban areas according to Internal Revenue Service data. Nearly half of taxpayers in rural counties have income that is too low to see any benefit from the Senate tax plan.

Check back here later for our full analysis of the Senate tax proposal.

NC Budget and Tax Center

Senate proposal is another tax cut for the wealthy and profitable corporations

Senate leaders announced they will continue on the path to ruin for North Carolina by pushing forward another series of income tax rate cuts this year that will primarily benefit the wealthy and profitable corporations.

The proposal unveiled this morning will do nothing to boost the wages of working people nor will it help connect rural communities to opportunity, despite Senators’ claims.

Instead, by lowering the income tax rates on corporate profits and income, the proposal continues to lock in the already significant breaks to the wealthy and profitable corporations.  To date, North Carolina’s millionaires have received an average tax break of $15,000 since 2013 while the state’s poorest households are carrying a heavier tax load.

North Carolina’s profitable corporations contribute the lowest amount in the country to ensuring that the infrastructure, workforce development and education that they benefit from is effective and efficient.  Under this proposal, the state will continue to ask little of large multi-state corporations and underfund the foundations of a strong economy for our state.

The proposed changes to the standard deduction and child tax credit are ineffective to offset the already greater share of income paid in state and local taxes by the lowest income taxpayers in North Carolina. And the resulting pressure on local governments to raise property taxes and on future state lawmakers to raise sales tax to make up the losses from these tax breaks for the wealthy will make it difficult to invest in opportunity for all.

It is important for all North Carolinians to see the full plan of the North Carolina Senate. We must ask what will be eliminated from our communities to pay for these tax breaks.  We must ask who they will ask to pay more.

The proposal passed earlier this week to lock in a low and arbitrary income tax rate that primarily benefits the wealthy is part of the effort to eliminate the income tax entirely and push the tax load onto middle- and low-income taxpayers.  Not only is this not a pathway to prosperity, this is another step backward for North Carolina.

NC Budget and Tax Center

Speaker Ryan’s first tax cut bill for the wealthy: The American Health Care Act

There is much merit to arguing the problems with the American Health Care Act with regards to its failure to value human life and access to health care.  As a health care bill, it fails miserably.  As tax policy, it is equally disastrous.

Make no mistake: While wreaking havoc on the health care system and undermining the health and well-being of our neighbors, Congress plans to cut taxes for the wealthy and raise the costs for everyone else.

The repeal of two Medicare taxes paid by high income earners will primarily benefit millionaires.  These taxes also achieved greater equity in the treatment of unearned income under the tax code.  Repealing those two taxes would mean that a couple making $10 million would see their effective tax rate cut in half.

The changed structure of the tax credits will mean North Carolinians, on average, will see a more than $5,000 loss in help to pay their health care premiums.  In fact, the drop for the average consumer in North Carolina ranks us second in the nation.  This will likely mean that North Carolina will be hardest hit by increasingly unaffordable health care and also the likelihood of a rise in the number of uninsured costing everyone.

More detailed analysis of the tax credit provision shows that the House’s tax credit structure will primarily benefit North Carolina consumers in more urban counties and those who are younger.

The Kaiser Family Foundation has a series of interactive maps analyzing the impact on North Carolinians in different income and age groups.  Many reports have pointed to the nationwide findings:  Older, low-income and rural people will lose the most.  This is because of the tax credits as well as various other provisions of the House’s plan that allow older people to be charged more, eliminate help for out-of-pocket medical expenses and remove the individual mandate. Read more

NC Budget and Tax Center

Tax cap amendment would lock in tax cuts for wealthy and profitable corporations

Yesterday the Senate Finance committee voted to move forward a bill that would amend the state Constitution to cap the income tax rate at the low and arbitrary rate of 5.5 percent. The bill will ensure that the tax cuts for the wealthy and profitable corporations since 2013 will remain permanent. It will lock in the cuts to public schools, health and services that promote thriving communities.

It is fiscally irresponsible to limit the choices of future lawmakers as they seek to meet the needs of a growing state and changing economy.  The result over time is likely to be more cuts to core public services and increases in other taxes that ask more from middle- and low-income North Carolinians.

Here are a few key flaws with locking into the state constitution the income tax rate: Read more