NC Budget and Tax Center

North Carolina’s high levels of income inequality no accident

North Carolina is among the states with the highest income inequality in the country, according to a new report from the Center on Budget and Policy Priorities. North Carolina ranks 14th in the country, with its richest residents— the top 5 percent of households— having average incomes 14.71 times as large as the bottom 20 percent of households.

These findings come after North Carolina policymakers gathered last week to address the damage of the Hurricane Matthew and ignored calls to fix North Carolina’s upside down tax code by enacting a surcharge on taxable income over $200,000 and keeping the corporate income tax rate at the already-too-low 4 percent.

As the researchers find, this kind of failure to enact progressive tax policy not only loses the state much needed revenue now and in the long-term, it can also make inequality worse.

The report offers recommendations about how state tax policies can be used to begin to reduce inequality.

  • Retain or expand taxes on inherited wealth, such as the estate tax.
  • Eliminate costly and ineff­ective tax breaks for corporations
  • Enact or expand earned income tax credits, which boost incomes among low-and moderate-wage working families.
  • Maintain an overall tax system that raises sufficient revenue to pay for the building blocks of shared prosperity.

For North Carolina, these recommendations signal we have made the wrong choices in recent years to ensure the economy works for everyone.  Instead, our policymakers have made the tax code work for the state’s wealthiest and powerful.

In the year ahead, let’s hope our legislative leaders begin to recognize that working North Carolinians and those struggling in today’s economy deserve a tax code that doesn’t create more barriers to their well-being.

NC Budget and Tax Center

Raleigh lawmakers aren’t really tapping Rainy Day Fund for hurricane aid

For years we have watched as policymakers set aside funding for a Rainy Day despite pressing needs in communities.  We were told this conservative approach to budgeting would be important in times of crisis—natural or economic disasters—that put pressure on the state to make immediate investments when their ability to adjust the revenue side may feel more limited.

Hurricane Matthew represented an important test of this approach.  And in their response, while emphasizing important immediate spending needs to stabilize communities in Eastern North Carolina, policymakers in Raleigh have demonstrated that they aren’t really willing to tap into that savings account.

Instead, they have written into the hurricane bill language that the Governor’s next budget proposal must recommend taking $100 million to repay the Rainy Day Fund before meeting existing needs.  It may not mean an explicit cut, given revenues are improving with an improving economy, but it will mean we will start off with less to maintain current service levels in the next fiscal year.  Certainly, North Carolina will be hampered once again in our efforts to address the range of unmet needs in the classroom, in communities and for employers if we cannot draw the funds that we have saved to make sure that doesn’t happen.

What will it take for legislative leaders to tap the Rainy Day Fund without restrictions if not to help communities devastated by natural disasters?  If not now, then when?

NC Budget and Tax Center

Unemployment insurance fix is needed

The Election Day exit polling of North Carolina voters found many deeply concerned about the economy and the inability of people in communities across our state to secure a foothold in the middle class.  We shouldn’t be surprised by that.

The recovery from the Great Recession has been slow and failed to deliver the kind of broad wage growth that delivers the benefits of expansion to the most people.  Instead, North Carolinians have experienced wages below where they were in 2007. Meanwhile too few jobs are available in many communities across the state.

Gateway communities—those small towns and cities—that served as the hub of manufacturing and the connection to economic opportunity for rural places were particularly hard hit in the recession and recovery with the loss of jobs in manufacturing and its failure to recover.  But these communities have continued to be hit with mass layoffs and have seen state policies that used to help get radically altered.

Today legislators gathered to discuss the unemployment insurance system but this broader context was absent as were the stories of the harm of changes made since 2013.  The unemployment insurance changes made in 2013 provide just one example of policy choices that put working people at a disadvantage when they have lost a job and need a hand up the most. By failing to design the system to cover a significant share of those who have lost their job through no fault of their own and to provide payment that is relative to the wages earned through prior work, the system is not as effective at ensuring that jobless workers can meet basic needs and stay attached to the labor market thus reducing demand for businesses goods and services.

It is time to fix NC’s unemployment insurance system so that it provides meaningful support for laid off workers, their families and their communities as they work to get back on their feet.

NC Budget and Tax Center

North Carolina policymakers still propose making budget decisions using disastrously flawed formula

The Governor’s Office of State Budget & Management has told agencies to limit their requests for increases in budget items to just 2 percent above previous levels.

This reflects roughly the flawed formula of population plus inflation that has proven disastrous in places like Colorado. It results in artificially lower budget requests that don’t actually reflect the needs and opportunities that could strengthen N.C. families, communities and the economy.

The OSBM memo—in addition to requesting 2 percent budget reductions across all agencies—also limits requests for additional funding to 2 percent.

As has already been noted by NC Policy Watch, the Governor may not be willing to cut education by another 2 percent—a figure that could bring per pupil spending down to more than 10 percent below pre-recession levels when adjusted for inflation.  That in itself should raise concerns because even if the Governor and legislators try to make up those cuts in other budget areas like health care or environmental protection or community economic development, the cuts would still have an effect on our students. Research shows that where a child lives, how healthy they are and their environment is, matters to their educational success.

Such a limited view of what matters to North Carolina’s success and an unwillingness to pursue the best evidence of what works to build thriving communities is also fueling the 2 percent limit on proposed new investments. Such an arbitrary figure won’t allow North Carolina to make progress or pursue opportunities that set us apart and move us ahead as a state.  It will hold state investment below pre-recession levels despite seven years of an economic expansion. It will mean missed opportunities.

When you stop state agencies from requesting what is needed for communities and for North Carolina families, this is what will happen:.

  • More than 5,000 4-year olds will stay on the waiting list for pre-Kindergarten services;
  • Medicaid reimbursement rates will remain well below the national average;
  • North Carolina will fail to achieve peak levels of investment in the Housing Trust Fund even as Eastern NC and communities across the state face a housing crisis

These are just a few of the areas where North Carolina will see little to no progress for our communities under this arbitrary approach to the state budget. Another year of this approach makes it clear that our leaders aren’t thinking about our state’s future.

NC Budget and Tax Center

Deadlines approach on some federal assistance programs for those affected by Hurricane Matthew

While we continue to learn about the many ways that Hurricane Matthew has delivered destruction and hardship to our communities, we know that there will be the need for many months and even years of rebuilding.  The North Carolina Justice Center stands at the ready to promote the best policies to support an equitable and inclusive recovery that builds thriving and resilient communities.

Right now, there are deadlines approaching to apply for critical federal assistance that we want to make sure Pulse readers have and share with their families, friends and neighbors in Eastern North Carolina.

  1. Food assistance is available to residents who have NOT been receiving food assistance but who need help accessing food in the following counties: Beaufort, Bladen, Columbus, Cumberland, Dare, Duplin, Greene, Harnett, Hoke, Hyde, Johnston, Jones, Lenoir, Pender, Robeson, Sampson, Tyrrell, and Wayne. More information can be found here.  The deadline is Wednesday, October 26th.
  2. Disaster unemployment insurance is available for residents in the following counties: Beaufort County, Bertie County, Bladen County, Columbus County, Cumberland County, Dare County, Edgecombe County, Greene County, Harnett County, Hoke County, Hyde County, Johnston County, Jones County, Lenoir County, Nash County, Pitt County, Robeson County, Sampson County, Wayne County, and Wilson County. Individuals affected by the disaster and are unable to continue working can apply for disaster unemployment insurance.  Be sure to apply by November 14, 2016.  You can call 1-866-795-8877  and visit: https://desncc.com/DES/ to apply online.
  3. General disaster assistance for housing, home repairs and other damage is available. Individuals—homeowners and renters— and business owners who sustained losses in the designated area can begin applying for assistance tomorrow by registering online at DisasterAssistance.gov or by calling 1-800-621-FEMA (3362).  It is recommended that you should apply even if you have insurance. Disaster assistance applicants, who have a speech disability or hearing loss and use TTY, should call 1-800-462-7585 directly; for those who use 711 or Video Relay Service (VRS), call 1-800-621-3362. The toll-free telephone numbers will operate from 7 a.m. to 10 p.m. (local time) seven days a week until further notice.

For more information regarding local services and resources, you can also dial 211 or visit www.nc211.org.