NC Budget and Tax Center

Changes to the state Constitution headed to the Senate floor

The Senate Rules Committee gave approval Friday to a suite of constitutional changes that would undercut our state’s economy permanently by setting a low, arbitrary income tax rate and limiting access to the state’s savings in times of emergency.

It is an entirely unnecessary move that seeks to permanently limit future budget choices to the ones that our current leaders prioritize above all else.  It is not only an insult to the wisdom of the framers of our state Constitution, but also to future North Carolinians and legislators whose priorities may differ from their own.

To recap just why such a move is completely unnecessary, let’s review how policymakers have already pursued these approaches to budgeting through public policy.

First, policymakers have already set a low, arbitrary income tax rate for individuals and profitable corporations, which will drop to 5.499 percent for individuals in January 2017 and eventually to 3 percent for businesses.  These changes began in 2013 and will continue to phase in, ultimately reducing the dollars available to invest in schools, parks and public health by at least $2.5 billion each year. More than two-thirds of the tax cut from the low individual income rate has benefited the top 20 percent of taxpayers. Policymakers continue to pursue a shift to the sales tax to make up for the revenue loss, which means the tax load has shifted to middle- and low-income taxpayers. Read more

NC Budget and Tax Center

North Carolina’s unemployment insurance system is the envy of no one

Last week the Center for American Progress and National Employment Law Project released a review of unemployment insurance as a federal and state partnership and the choices in recent years that have made it less effective at reaching jobless workers.

North Carolina policymakers, of course, aggressively pursued the worst changes in unemployment insurance. The result is a system that ranks among the least effective at providing temporary wage replacement for jobless workers while they search for work and delivering a stabilizing force in local communities and the economy overall.

The challenges they outline in the report face North Carolina acutely:  too few unemployed workers have access to tools for successful re-employment, first employment and/ or training; American workers are more vulnerable than ever to involuntary unemployment, yet fewer are protected by unemployment insurance; and finally, the unemployment insurance system is unprepared for the next recession.

The report authors provide a set of policy recommendations that would address these challenges and go a long way to not just protecting workers and communities from the shock of unemployment but would actually prepare for jobs loss by investing in the re-employment, training and other measures that retain jobs and support smoother transitions to new ones.  Here are some their recommendations: Read more

NC Budget and Tax Center

WARNing: Mass layoffs threaten local economies when state pulls back

Freightliner will lay off an additional 800 jobs in June which is the latest in a series of announcements this year of significant mass layoffs at one company. More than 7,000 mass layoffs have already been announced in 2016 and will take place over the course of the year. Whether temporary or permanent, they will ripple through communities as workers seek new jobs and try to meet basic needs while looking for work.

As you can see in the map below, the communities affected by the 2016 announcements to date span the state. The losses of small towns and cities represent a greater share of their workforce, even if the total numbers are less than major metropolitan areas.

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For these communities, it will be important to support jobless workers so that the broader community can stabilize and pursue new or expand existing employment opportunities. North Carolina has a history of dealing with these mass layoffs and particularly the loss of employers and entire industries: unemployment insurance has always been one of the most critical tools for communities to be able to connect jobless workers to.

Yet state policymakers have so reduced the reach and effectiveness of the unemployment insurance that many communities will struggle to ensure a mass layoff doesn’t derail a community’s local economy and social fabric.

Here are a few key ways in which unemployment insurance, as it is currently operating, won’t be as effective in the face of mass layoffs. Read more

NC Budget and Tax Center

The fallout of income tax cuts continues to ripple through North Carolina communities

There is now more news that state income tax cuts are forcing local governments to pursue bad deals as they scramble to deliver basic services. While state leaders claim to be looking out for rural North Carolina, it is ever clearer that income tax cuts put many local governments and residents in a bind.

Tax cuts have reduced available state revenue by billions of dollars, resulting in less support for many rural communities. Unfortunately, many rural communities lack the tax base and economic activity needed to make up for lost state funds, forcing them instead to consider alternatives that may ultimately cost rural governments more over the long run. Already, local government’s commitment to public schools through per-pupil spending has already increased significantly since 2008.

Instead of revisiting the choice to slash income taxes, a bill moving through the Senate would give local governments more ways to finance new school buildings at great costs to residents and while putting at risk other classroom investments.  The legislation would expedite the process under which lease-purchase agreements move forward and make available state funds for students and teachers to go to private developers. Such a deal is already on the table in Robeson County where the Treasurer’s Office estimates that the increase in debt load for Robesonians will go from $200 to $4,000. Not only could there be job losses as teachers and teaching assistants lose their jobs through consolidation of schools, the prioritization of repayment of this debt above other local government obligations and the allocation of sales tax revenue to private developers would be harmful to many other public services in communities.

And, as Terry Stoops of the John Locke Foundation notes, there is little research to suggest that new facilities will improve educational outcomes, and certainly not when they risk other investments proven to drive student achievement and teacher retention.

Why would local leaders and community members need to seek out such a bad deal for its citizens?  Because the backlog for renovating and upgrading schools is just one of the things that has fallen behind as a result of income tax cuts for the wealthy and profitable corporations. In the past, school construction received direct support through allocation of lottery funds and corporate income tax collections. Now, both of these streams have had to be used to patch other holes in the education budget as income tax cuts have sapped the availability of state revenue.

Given that income tax cuts will continue to phase-in, it is unlikely that North Carolinians will stop seeing such costly deals. The only question is when will local communities make sure their leaders make better choices and call for an end to income tax cuts that aren’t helping build stronger communities?

Commentary

Deportation is costly, thwarts our history as a land of opportunity, freedom

The Obama administration has announced that it will begin immigration raids to deport Central American women and children in May and June.  The first round of raids in January affected North Carolina communities, and it appears that in the early days of this round, families in North Carolina have once again been a focus.  These raids have already proven to generate additional apprehension, detention, legal processing and transportation costs, not to mention heightened fear and the associated drain on economic and civic participation.

The targeting of Central American women and children is particularly concerning given the violence that they are fleeing in their home country and the hope for safety that they seek in the United States.  For example, El Salvador and Honduras are on track to reach the world’s highest homicide rate in 2016.  And that metric is borne of countless other crimes and insecurities brought to bear on families of which sadly women and children are often the primary targets. Reports compiled by the Office of the UN High Commissioner for Refugees include stories of domestic violence, constant threats of sexual abuse, extortion, and threats to harm family members by armed criminal groups, including gangs.

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In 2016 already the federal government has ordered 2,194 individuals deported from North Carolina, making our state the sixth highest in the country.  Nearly four hundred of those ordered deported are children.  The cost of this federal effort in North Carolina alone is $51 million, and with the upcoming raids that cost is likely to grow.  These dollars could instead be sent to North Carolina to provide counseling for children arriving with trauma, or could fund any number of investments that provide all communities with access to opportunity and security.

Beyond the costs to government that in the end we all pay, there is a far deeper impact on the individual and a greater effect on the psyche of a community.  Children experience significant trauma from raids, not to mention the additional harm of increased economic hardship and residential instability if they are separated from their parents. Broader communities, whether targets or not, experience the insecurity of not knowing when their neighbor, co-worker or friend could be taken or whether they themselves could be taken by mistake.

Raids are the bluntest of tools available when those in government are responding to a complex economic and social phenomenon. Moreover, Homeland Security Secretary Jeh Johnson’s doubling down on raids during last week’s trip to Central America is disheartening and legally questionable as well. Immigrant rights organizations have already highlighted the legal issues related to asylum and due process issues at hand in the speedy deportations of Central American children and parents this year.

And yet at the most fundamental level, raids fly in the face of what America has said it is—a land of opportunity, of freedom and of security.