Governor McCrory released a budget today that falls short of returning us to pre-recession levels but does expand investments in critical areas. The budget assumes that available revenues will remain the same as collections under the current tax system and benefits from slight improvements to revenue collections due to improved economic performance. The Governor is therefore primarily able to expand investments in certain areas by reducing spending in others and relying on tuition increases and other fees.

Notably, the Governor fails to define the tax changes he would consider as part of a tax reform effort representing another missed opportunity and a signal that piecemeal changes to the tax code are acceptable. Indeed, the Governor commits to repealing the state’s estate tax which benefits multi-million estates. Last year, just 23 estates paid the state estate tax.  Read More…

Ahead of the release of the Governor’s budget tomorrow, new analysis by the Center on Budget and Policy Priorities puts North Carolina’s cuts to higher education in the context of nationwide trends.  The result of state budget cuts to public universities in North Carolina and across the country has been higher costs for students and families.

North Carolina increased public university tuition by 31 percent according to this analysis.  Research shows that these tuition increases will impact low-income students’ enrollment and completion.

This will only make worse the already significant enrollment and completion gap that exists by socio-economic status greater.  Already among high qualified students, high-income students are twice as likely to enroll in 4-year universities than low-income students.

As the author’s of the study write:

This research suggests that states should strive to expand college access and increase college graduation rates to help build a strong middle class and develop the skilled workforce needed to compete in today’s global economy. It suggests further that the severe higher education funding cuts that states have made since the start of the recession will make it harder to achieve those goals.

Let’s hope we see the Governor move to reinvest in higher education tomorrow.

Last month marked one-hundred years since the passage of the 16th amendment which established the federal personal income tax. As one columnist remarked on the occasion, this amendment receives far less celebration than other amendments or than from what it is due.

From the air we breathe and the water we drink to the security we feel at night, from the teachers in the classroom to the meat on the table to the airplanes that do not crash, from FEMA and CIA, FBI and BATF and dozens of other acronym agencies and programs, taxes — as Justice Holmes observed — are what we pay for civilized society.

The first century of the personal income tax can also teach us  a lot, especially in this era when the income tax is under attack.  As the American Prospect article highlights, a progressive income tax can help societies do big things and those things include more than just raising revenue.  Check out their piece here.  The belated birthday of the personal income tax should remind us to celebrate what income taxes have made possible not eliminate them.

Yesterday, the Senate passed House Bill 82 that would reduce the Earned Income Tax Credit from 5% of the federal credit to 4.5%.  The reduction will impact more than 900,000 working families who earn low-incomes and pay taxes. This decision occurs at the same time policymakers are maintaining tax policies that benefit the wealthiest taxpayers and provide no broader economic benefit.

While this type of bill is entered every session in order to make decisions about how the state tax code will align with the federal tax changes made in the past year, policymakers made some telling decisions in this one.  First, policymakers reduced the Earned Income Tax Credit in order to offset the cost of improvements to the credit that were extended in 2012. Improvements that the state has conformed to in the years since many of those improvements passed under the Bush administration. Second, policymakers decided to conform to a more costly federal tax change that would put in place a higher income threshold on limiting itemized deduction, which will mostly benefit higher income taxpayers.  Read More…

North Carolina’s post-secondary education institutions—both public universities and community colleges—are the envy of other states.  The commitment to building these institutions in North Carolina was earlier than in most states. Throughout our history, their presence in our communities have supported big advances in the educational attainment of our population and strengthened our ability to attract and retain business.

Over the course of the Great Recession, North Carolina’s commitment to these institutions has begun to falter as demonstrated by reduced funding since the start of the Great Recession (FY2007-08) at the state level: 11 percent lower for public universities and 4.3 percent lower for community colleges.

State funding declines have impacted campuses and communities.  Tuition at UNC system schools has increased by nearly $1,000 in inflation-adjusted dollars over the decade, while community college tuition increased by $650.  These increases can prove prohibitive for students from low-income families where post-secondary costs in North Carolina already represent more than one-third of the household budget.  Student’s classroom experience has also suffered due to larger class size, fewer class offerings and less exposure to the equipment that can make job training for the 21^st century relevant. Read More…