NC Budget and Tax Center

For Throwback Thursday, the Senate is relishing in old school ideas.

Case in point, a bill was filed today to further cut income taxes for the wealthiest taxpayers and profitable corporations – an eerily similar approach as the legislation passed in 2013, which is now hurting our state and economy.

Income tax cuts like the one proposed in today’s throwback are not the answer to the state’s economic challenges. Just ask Senator Brown who is working to secure additional sales tax revenue for rural counties that have been hit hard by the 2013 tax changes which ultimately reduced state investments in public schools and economic development. Take a look at the academic research which finds no consensus on tax cuts benefiting the economy through job creation or increased incomes. Or consider the experiences of states’ like Kansas where income tax cuts have not delivered a boost in jobs or wages but have resulted in cuts to core services.

The continued pursuit of income tax cuts will not boost North Carolina’s economy, it only serves to further reduce revenue that pays for services that people rely on each day, like our schools.  Preliminary estimates suggest the cost of this bill would be $1 billion, on top of the nearly $1 billion price tag of the tax changes passed in 2013.

The few who will benefit from these tax cuts will once again be the state’s wealthiest taxpayers and profitable corporations.  Read More

NC Budget and Tax Center

After several states including North Carolina challenged the extension of Deferred Action for Childhood Arrivals and the Deferred Action for Parents of Americans a preliminary injunction was issued holding up implementation of these immigration directives with the potential to reach 5 million immigrants without documents nationwide. While the issue is considered in the courts, the delay has real human, fiscal and economic costs.

As the Center for American Progress notes in their analysis:

The Council of Economic Advisers, or CEA, estimates that the November executive action providing deferred action to low-priority individuals will increase the national gross domestic product, or GDP, by nearly $60 billion over the next decade. In the aggregate, CEA estimates that the immigration directives will increase the GDP by $210 billion. As CAP demonstrated in a recent report, payroll tax revenues will increase $22.6 billion in five years and the solvency of the Social Security system will increase by $41 billion over 10 years as workers earn higher wages…State and local economies also stand to benefit immensely from the executive action.

Indeed, there are clear benefits to state and local economies to ensuring that these low-level undocumented immigrants can work and care for their families free from fear of deportation. As we have written about in the past, North Carolina is poised to benefit economically from these policies both through increased labor force participation and tax revenue. Not only are there estimated to be increases in state tax revenue but their participation in local economies as consumers is also important. That is in part why thirty-three mayors have filed an amici brief to urge the courts to lift the injunction: leaders of cities know that immigrants make an important contribution to their vibrancy. Read More

NC Budget and Tax Center

It bears repeating that the first rule of climbing out of a hole is to stop digging. But some policymakers obviously haven’t learned that lesson. They are pushing more tax cuts for those who need them least, even though revenue for schools and other priorities is coming in below projections because of tax cuts that have already gone into effect.

Last week Senator Berger laid out a tax plan that would allow profitable corporations to escape some of their responsibility for supporting the public services that benefit their businesses and the stability of the broader economy. The plan would do nothing to address the uneven recovery from the last recession, which has done nothing to boost the wages of most North Carolinians.

The senator said he will propose another round of corporate income tax cuts: reducing the rate to 3 percent from 5 percent by 2017 and changing the way profitable corporations account for their income for tax purposes. and Profitable corporations have already seen their tax rate drop from 6.9 percent, at a cost of nearly $350 million. Dropping the rate to 3 percent would mean roughly $500 million in additional revenue lost to the state’s schools, public health care and courts, to name just a few of the core public services that support opportunity for everyone in the state.

There is little hard evidence to support Senator Berger’s claim that corporate income tax cuts are a good strategy for boosting the state’s economy. Tax cuts to profitable corporations flow to shareholders and thus cannot be guaranteed to stay in the state and generate economic benefits for North Carolina. Read More

NC Budget and Tax Center

Policymakers have chosen to reduce state spending in recent budgets and appear poised to continue that approach even despite a recovering economy.   Such small thinking ignores the fundamental role of state budgets in supporting the broader economy and delivering opportunities to communities and families.

The state’s most recent budgets (and current budget proposal from the Governor) break dramatically with our state’s past and put at risk the foundations of a strong economy by spending at historically low levels as a share of the economy. An analysis of data back to 1970 on state spending shows that North Carolina today is dedicating a lower level of our total resources to public services than we did in 1973 (see graph). That year was the start to the 1973-1975 recession characterized by the oil crisis and stagflation, and largely recognized as the end of the post-World War II economic boom. It’s also when computers conducting sophisticated analysis took up entire rooms or buildings, office work had not yet been impacted by the use of personal computers and those that did exist could store just 16 lines of text.BTC - Collective Commitment 1973

Today, North Carolina has passed the fifth year of the official recovery from the Great Recession that started in 2007. For six years in a row state spending has continued to erode and the Governor’s budget would continue that trend.

Looking at state spending as a share of the economy, or total state personal income, is akin to the way in which federal budgets are assessed relative to GDP. Importantly it represents a reflection of our collective commitment to build an economy that works for everyone. Such a measure also provides a way to assess whether we are spending more or less over time while also considering that with economic growth there are more resources available and needed to support the economy.

The evidence is clear on this point: smart state spending is necessary to support positive economic outcomes. Read More

NC Budget and Tax Center

A new report by the Center for American Progress highlights state actions that have increased access to post-secondary education for all students regardless of immigration status.  The report outlines the importance of state legislation on tuition equity given the lack of federal progress on the issue.  But it also highlights the differences in experiences for students depending on where they live.

For those students living in North Carolina where tuition equity is not the law, the barriers to access and completion of a post-secondary education and skills training for future jobs are higher.  In Texas, where students are able to pay in-state tuition and access financial aid, the benefits have been real for those individuals and the broader economy and state.  The costs are also minimal:

Of the 1.3 million students enrolled in Texas public universities and community, technical, and state colleges during fiscal year 2012, 20,049—or 1.1 percent—benefited from the Texas DREAM Act and paid more than $40 million in tuition and fees toward higher education. Meanwhile, only 2,819 Texas DREAM Act students received state-sponsored grant aid at a cost of $9.56 million—just 2 percent of the more than $430 million in state-supported grants distributed to more than 130,000 students across the state.

These small costs also do not take into account the enormous tax contributions made by undocumented immigrants. In 2010, undocumented Texas residents paid more than $1.6 billion in state and local taxes, a portion of which went toward supporting Texas’ public colleges and universities.

Since the start of the new year, 12 states have introduced tuition equity legislation. 29 states have some type of legislation providing tuition equity to students without documents or with Deferred Action for Childhood Arrival status. It is time for North Carolina to move forward with tuition equity.