Back to School Series

Measuring poverty shows that government programs are working

Every year when the Census Bureau releases its annual updates on the economic well-being of the nation and our state, we turn to a measure that has largely been rejected by most people as reflective of what it takes to get by today.

The poverty measure, as typically lifted up in media reports, is calculated based on the food choices of families living in the 1950s.  There are various efforts to get a more accurate sense of what it actually takes to makes end meet and avoid hardship—doubling the figure is one way that gets you to the definition of low-income in most circles, and another is developing market-based measures on the costs of the full range of goods a household needs, like the Living Income Standard.

The US Census Bureau and academic researchers have developed another tool—the Supplemental Poverty Measure. This measure includes the government programs that seek to serve low-income people that aren’t accounted for in the official poverty measure. In the U.S., this measure shows that 13.9 percent lived in poverty and that the two most significant programs working to move people out of poverty were Social Security and Refundable Tax Credits. Read more

NC Budget and Tax Center

Job announcements still fall short of 16,000 new jobs needed every month in N.C. to get back to pre-Recession levels

The North Carolina GOP released a press release this week touting August job announcement figures as indicative of the success of their policy choices that have cut taxes for the wealthy and profitable corporations, put our natural resources at risk and reduced support for the tools like unemployment insurance and job training for people who have lost their jobs.

Set aside that once again there has been no causal relationship proven through the simple statement of job growth occurring. It remains important to evaluate these statements against what we know.

First, the job announcements in August have not materialized into jobs just yet.  From time to time, there are announcements that don’t end up turning into actual jobs, despite best efforts. Moreover, it is unclear how many of the jobs will go to current North Carolina residents and how many will go to those relocating from other states. The August jobs numbers from the Bureau of Labor Statistics will be released on Sept. 15.

Second, North Carolina’s job growth year over year continues to be on par with national job growth.  From June 2016 to June 2017, North Carolina’s employment grew by 1.7 percent, while the nation’s grew by 1.6 percent. This suggests that North Carolina’s policy choices are not driving differences in employment growth but instead that the state is finally growing in step with the nation.

Finally and most importantly, this job growth is insufficient to achieve pre-Recession levels of employment. Each month North Carolina would have to create 16,000 jobs to make progress towards that employment level in the face of a growing population.

Three thousand may get us a fifth of the way there, if they materialize. But we’d like to see a press release on what their plan is to actually boost employment for those who continue to face too few job opportunities in their community, need retraining for new industries, and experience other barriers to employment. Because tax cuts just make it more difficult to close the jobs gap in North Carolina that persists eight years after the national recovery began.

Alexandra Sirota is the Director of the Budget & Tax Center, a project of the NC Justice Center.

NC Budget and Tax Center

House Finance Committee considering bill to amend state constitution tonight

UPDATE:  House Finance was cancelled last night.  Stay tuned.

In another last-minute consideration of a major policy change, the House will take up a bill (Senate Bill 75) this evening (15 minutes after session ends) that would amend the state Constitution to permanently cap income tax rates at 5.5 percent. Lawmakers have already proven that they can cut income taxes without changing the state Constitution — they have been doing it since 2013.

Having the maximum rate for income taxes set in the state Constitution limits the tools future policymakers will have to meet the needs of a growing state; to make up the funding difference from the likely federal cost shift that is proposed on Medicaid, food assistance and other key services; or to address unexpected natural disasters or major economic disruptions.

This constitutional amendment locks in the tax giveaways for millionaires since 2013 and will likely just shift the tax load even more onto middle- and working-class families.

Here is more information about the proposed change to the Constitution.

Audio of the House Finance Committee meeting may be available here.

2018 Fiscal Year State Budget, NC Budget and Tax Center

Price tag for tax cuts in final budget tells half the story

The Locke Foundation was having fun with math yesterday in an effort to defend a fiscally irresponsible package of tax cuts in the final budget lawmakers are close to approving. Why? because—wait for it—they would like you to think they haven’t just given another green light to tax cuts that further pump up the gains for wealthy taxpayers while making virtually no progress in addressing the tax load carried by middle- and low-income taxpayers.

Amidst their convoluted and selective use of the numbers, they try to confuse their readers about three primary facts regarding the state’s tax code after the passage of this budget:

  1. The average tax cut received by the taxpayer in the top 1 percent (whose average income is $1 million) compared to the pre-2013 tax code is nearly $22,000, which is more like 96 times the tax cut that the middle-income taxpayer in North Carolina will receive each year as a result of tax changes since 2013. The average tax cut for middle-income taxpayers is $225.
  2. Once the final budget passes, one in three of net tax cut dollars goes to the top 1 percent of taxpayers, whose average income is a million dollars. Under the final budget, nearly 80 percent of net tax cuts since 2013 will flow to the top 20 percent of taxpayers once all the latest tax code changes are fully implemented.
  3. When we look in isolation at this year’s tax plan, policymakers may have paid attention to their egregious track record when it comes to addressing the tax load for most North Carolinians but they have fallen short of setting our tax code right. Their final tax plan still gives the wealthiest taxpayers the majority share of the net tax cut compared to current law. And their full track record shows their failure to put middle- and low-income taxpayers front and center as they make their tax policy decisions. Budget writers and supporters don’t want to talk about all the changes that have happened since 2013, the loss of the personal exemption and other credits and deductions that benefited working families, including the Earned Income Tax Credit and the Child and Dependent Care Tax Credit, as well as the broadening of the sales tax.

Still worse, with this final budget they continue to push us further towards a single revenue option in addressing future downturns—raising the sales tax, which will inevitably mean asking more from low- and middle-income taxpayers again.

Rather than try to present and sell tax cuts that largely benefit the wealthy and profitable corporations as the everyman approach to growing the economy, which it isn’t, a more urgent math problem needs to be worked out, sooner rather than later. Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Failed tax-cut experiment will continue under final budget agreement, pushes fiscal reckoning down the line

The final budget agreement from leaders of the House and Senate puts North Carolina on precarious fiscal footing in the second-half of the second fiscal year of the two-year budget and beyond.  The tax changes that leaders agreed to—which were less a compromise and more of a decision to combine the tax cuts in both chambers’ proposals—make the cost of these tax cuts bigger than what either chamber proposed.

The cumulative cost of major tax changes since 2013 will be at least $3.5 billion annually.

Because of the way that the budget phases in the tax changes, budget writers only report on half of the fiscal year impact of the tax changes that include rate reductions for personal and corporate income, an increase in the standard deduction, conversion of the child tax credit to a deduction and sales tax changes.  The reality is the full cost of the tax changes proposed will mean the state has $1 billion less than they would have had under current tax law.

That means that in the creation of the next two-year budget, beginning in Fiscal Year 2019-20, legislators will have to cut current service levels that are already broadly recognized as falling far short of need, or raise revenue to meet the demands of a growing state population.  Given federal uncertainty, even the investments they suggest will be made will be put in jeopardy by their tax choices and decision to hide the full impact of the tax changes.

Compared to pre-2013 tax law, the new changes to the tax code, coupled with other changes since 2013, will deliver an annual average tax cut to the top 1 percent of taxpayers of $22,000 while the bottom 20 percent of taxpayers will receive an average annual tax cut of just $16 each year.  Of those in the bottom 20 percent of taxpayers, only 39 percent will receive a tax cut. Read more