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.

 

NC Budget and Tax Center

This is the 5th post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years. See the other posts here.

The North Carolina Senate wants to take a sacred public trust, the education of our children, and subject it to the whims of a voluntary funding system. After frittering away precious resources for schools by giving millionairesamong the only people who have prospered much in recent years – an income tax cut they didn’t need, the Senate now wants you to voluntarily give back part or all of your income tax refund so teachers can get a pay raise.

Teachers deserve a raise. They are among the lowest paid in their profession in the country. And many North Carolinians would no doubt like to help out. But that’s the reason we pay taxes in the first place. We shouldn’t have to pay taxes and then be asked to return our refunds so millionaires can have more money that isn’t likely to be spent to grow jobs or the economy. A better, saner solution would be for the Senate to acknowledge reality: the tax plan that it and the House passed last year and the governor signed into law is failing the people of North Carolina – and their kids.

But rather than do that, senators propose to modify the state income tax form so that you can contribute your income tax refund to the North Carolina Education Endowment Fund, which will support teacher pay raises.

Though we’ve said it many times before, it’s worth going over again: Last year’s tax scheme provided an overwhelming benefit to the wealthiest taxpayers in the state by adopting a one-size-fits-all income tax rate and making other changes that primarily benefited high-income earners.  Sixty-five percent of the net tax cut goes to taxpayers whose annual income averages nearly $1 million dollars. Nearly all, 93 percent, of these taxpayers who are in the top 1 percent of taxpayers get an income tax cut.

It’s downright amazing that rather than rescind the income tax cut for millionaires, as House Bill 1210 would do and result in $300 million in badly needed resources for schools and other priorities, the Senate proposes to establish a voluntary system of paying to educate our children.

It will be interesting to see how many North Carolina taxpayers take up this option. Many may, out of the goodness of their hearts. But do we really want our teachers to have to depend on kindness to get by?

NC Budget and Tax Center

The Senate budget shows the high price that ordinary North Carolinians will pay for the tax cuts lawmakers enacted last year for the wealthy and profitable corporations.

Thousands of North Carolinians who are older, blind or have disabilities will no longer get the health care they need, schoolchildren will lose the support of teaching assistants, college will continue to be more expensive for those who can least afford it and struggling communities will have fewer grant resources to build their economic capacity.

The Senate’s proposed budget does not put North Carolina on a sound economic footing for the future since it fails to make much-needed investments in education, job training and healthy communities. This is not a responsible plan, but a failure to recognize that adequate revenue is needed to support the services that will help our state thrive.

NC Budget and Tax Center

Last week, the folks at five thirty eight, a non-partisan website dedicated to statistically robust analyses of social, political and economic phenomena led by Nate Silver, released an analysis of claims that unemployment insurance cuts at the national level have been good for the country’s economy and jobless workers.

The claims sound eerily familiar to those in North Carolina of a Carolina Comeback. But similar to those claims, the folks at five thirty eight find these national claims to lack support from available evidence.

First from their findings specific to those who have lost unemployment benefits: “Of the roughly 1.3 million Americans whose benefits disappeared with the end of the program, only about a quarter had found jobs as of March, about the same success rate as when the program was still in effect; roughly another quarter had given up searching.”

Second, jobless workers, particularly the long-term unemployed, are not moving to employment. From the article: “Only about 10 percent of the long-term unemployed find jobs each month, a metric known as the job-finding rate. Among those unemployed six months or less, the finding rate is nearly 25 percent….”

Cutting off unemployment benefits have not delivered improved job prospects for the hundreds of thousands still seeking work across the country and in North Carolina. A different approach is needed.