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Friday the Bureau of Labor Statistics and the NC Division of Employment Security released data on the state of North Carolina’s labor market. The unemployment rate ticked up to 6.4 percent over the month but is still below where it was a year ago.  Despite this annual improvement in the unemployment rate, the reality is the labor market continues to provide too few job opportunities for those who seek work.

The number of missing workers, which estimates who would be in the labor market if job opportunities were stronger, provides additional insight into the state of North Carolina’s labor market.  As of May 2014, there are an estimated 230,517 missing workers in North Carolina.  Again, these are North Carolinians who would be seeking work if jobs were available. If these workers were included in the official unemployment rate that rate would be nearly twice the official unemployment rate: 11.3 percent rather than 6.4 percent.

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NC Budget and Tax Center

From the way legislators have been behaving the past two years, you would think that North Carolina’s recovery from the recession has weathered the economic storm. And yet, time after time, the evidence has shown that North Carolina continues to be far from where we need to be to declare clear and sunny days.

Revenue needed to pay for basics like schools and health care is still far below pre-recession levels, there are still too few jobs for those who want to work, and the state’s poverty rate remains higher than normal. Over the past two years, lawmakers have approved budgets that failed to meet classroom needs, reduced funding for health care for those in need and allowed backlogs to grow in our courts.

So their decision to continue to set aside money in the Rainy Day Fund, a reserve they traditionally contributed to in good times to ensure that they didn’t have to make deep, damaging spending cuts during the next downturn, is, well, strange. It’s like digging a storm shelter in the middle of a tornado.

To be clear, the Budget & Tax Center has always been an advocate for a stronger Rainy Day Fund in North Carolina. And yet, boosting contributions to the fund when core public investments are being starved is just another self-imposed limitation on lawmakers’ ability to meet pressing current needs. At each turn in the budget process the Governor, the Senate and the House, have all opted to squirrel away a little more rather than meet current needs. That’s not responsible. It’s counterproductive and short-sighted, especially since North Carolina’s Rainy Day Fund balance currently is about 3 percent of overall state operations, nearly double where it was four years ago, when it was just 1.56 percent.

BTC - Rainy Day Fund ContributionsRight now, the biggest threat to the state’s future is not inadequate Rainy Day Fund contributions. It’s the tax plan lawmakers passed last year, which has drastically reduced the state’s ability to invest in priorities like education, transportation and other keys to building a strong economy that creates widespread prosperity. Indeed, the revenue shortfall that lawmakers will have to contend with in the fiscal year that begins July 1 could be as high as $600 million.

Setting aside money in the Rainy Day Fund won’t do anything to fix the gap that the tax cuts have opened between available revenue and the cost of providing for the everyday needs of North Carolina families, schoolchildren and seniors. While having a strong Rainy Day Fund is nice, having a tax system strong enough to meet our needs is even more fundamental.

NC Budget and Tax Center

The House budget shortchanges the needs of North Carolinians — the inevitable result of tax cuts for wealthy people and large, profitable corporations.

And the House worsened the state’s prospects by voting down restoration of the state Earned Income Tax Credit, a proven tool for helping low-paid, working families make ends meet.

It’s time to reverse course and get back to investing in North Carolina’s future. That means stopping the next round of tax cuts scheduled to start in January 2015 and reducing reliance on lottery proceeds – an income source that falls most heavily on lower income people.

NC Budget and Tax Center

Earlier this week Senator Berger announced that he and his colleagues drafted an amendment that would meet the demands of Moral Monday protestors but couldn’t find any sponsors. That seems curious given that, barring two sections which have no basis in the Moral Monday agenda, the proposal is not only revenue neutral but provides for additional revenue to meet the state’s pressing needs that have been unaddressed since the start of the Great Recession.

In reviewing the amendment for the amendment’s alignment with the Moral Monday agenda and fiscal impact, it is clear that there is a fiscally responsible path forward for meeting the priorities of North Carolinians to ensure that the state’s most vulnerable citizens can access health insurance, our children can be ready and prepared to learn at school with quality childhood experiences, our workforce can be trained for the jobs of the future, working families can be supported as they struggle to get by on low-wages and the human rights and ability to access a fair justice system for all North Carolinians can be protected.

So here is a bit on what we found. Read More

NC Budget and Tax Center

False claims abounded this morning in support of the House Finance Committee’s rejection of restoring the state Earned Income Tax Credit, which would have helped working families make ends meet and undone some of the damage from the tax plan adopted last year. The Earned Income Tax Credit is a proven tool to help working families make ends meet and move up the economic ladder. In North Carolina, nearly 1 million taxpayers received the state Earned Income Tax Credit.

Led by House Republicans, the committee defeated a restoration amendment, voting against a measure to support North Carolina’s lowest paid workers. Here is a look at the false claims tossed around today, followed by the reality.

  • Those opposed to restoring the state EITC said the tax credit isn’t necessary because the point of the EITC is to offset taxes paid at the federal level like FICA taxes. REALITY: the state EITC plays a powerful role in offsetting the impact of state and local sales tax. An EITC at the state level is the most effective, most sharply focused way to counteract the situation today where the lower your income is the higher percentage of it you pay in state and local taxes.
  • Those opposed to restoring the state EITC claimed that taxpayers have gotten a reduction in their sales tax. REALITY: the 2013 tax plan extended sales taxes to more goods and services, increasing the amount of sales tax paid by many consumers not the rate. The reference here is likely to the expiration of the temporary sales tax and high-income surcharge that was put in place to provide a more balanced approach to closing significant budget shortfalls brought on by the job loss of the Great Recession and revenue collapse. This was a temporary sales tax set to expire.
  • Those opposed to restoring the state EITC claim that it works against “empowering” people to work, earn money, and support their families. REALITY: the state EITC only goes to families and individuals who work. And it builds on the success of the federal credit at moving people into the workforce, especially single mothers who struggle to raise their children and hold down a job when affordable child care is out of reach. Here is how the respected Center on Budget and Policy Priorities particular research findings for the benefits to women and children: “Women who benefited from those EITC expansions also experienced higher wage growth in subsequent years than did otherwise similarly situated women.  And, by boosting the employment and earnings of working-age women, the EITC boosts the size of the Social Security retirement benefits they ultimately will receive.  In addition, the research shows that by boosting the employment of single mothers, the EITC reduces the number of female-headed households receiving cash welfare assistance.”
  • Those opposed to restoration of the state EITC claimed that they already did enough last year to help working families. REALITY: the 1 million working families who will lose the state EITC will see their taxes go up. The net impact of changing the standard deduction and increasing in the Child Tax Credit by $25 and making all the other tax changes is still an increase in taxes for some taxpayers. For example, a married couple with two kids earned around $23,400 in taxable income before paying income taxes under the old tax code. Under the new tax plan that family will begin to pay state income taxes once it earns around $19,400 in taxable income.

Finally, the state EITC restoration would have been paid for by reducing the size of the tax cut for large, profitable corporations from a rate reduction of 6 to 5 percent to a rate reduction of 6 to 5.6 percent.The amendment would put greater balance into distributing the benefits of the tax plan passed last year.

BOTTOM-LINE REALITY: Supporting low-income working families is more likely to strengthen the economy than providing large, profitable corporations with a tax cut that they aren’t likely to spend locally or use to expand their payroll in the state.