NC Budget and Tax Center

The “tough choices” Governor McCrory says he made in his just-released budget proposal were self-inflicted. They come from tax cuts that primarily benefit the wealthy and profitable corporations, meaning there is too little left to invest in education and other building blocks of a strong economy.

Also troubling is the Governor’s use of changes to the budgeting process to mask the state’s inability to keep up with growing needs. It’s wrong to abandon longstanding practices that have served North Carolina well just to avoid debate over failed tax policies. Budget tricks won’t hide the fact that this will make it even harder in the future to promote broad prosperity.

NC Budget and Tax Center

In a piece released on Monday, Paul Krugman reflected on the decision by Walmart to raise the minimum wage of its workers. He notes that this will likely lead to many more companies following suit. Indeed TJ Maxx-Marshalls has already signaled that it will do the same for its workers this year.

More than moving business to act, these private sector initiatives signal that the economic arguments—reduced turnover, higher productivity, improved morale– for raising the minimum wage standard through public policy make good sense. As Krugman points out:

What this means, in turn, is that engineering a significant pay raise for tens of millions of Americans would almost surely be much easier than conventional wisdom suggests. Raise minimum wages by a substantial amount; make it easier for workers to organize, increasing their bargaining power; direct monetary and fiscal policy toward full employment, as opposed to keeping the economy depressed out of fear that we’ll suddenly turn into Weimar Germany. It’s not a hard list to implement — and if we did these things we could make major strides back toward the kind of society most of us want to live in.

The bottom line is that the choice to keep the minimum wage standard low as a matter of policy no longer makes sense for workers or businesses. It’s time for policymakers to follow these leaders and raise the minimum wage.

NC Budget and Tax Center

The News & Record had an editorial this weekend on the inconsistent choices policymakers have made as it relates to tax code spending. Some tax breaks have ended while others remain and even may get expanded this session. From the piece:

Tax breaks for movie productions and historic property renovations are out. Tax breaks for more data centers are in. The North Carolina legislature is still picking “winners and losers,” but the criteria have changed.

The bottom-line is that policymakers have not established the appropriate processes to evaluate tax code spending and base their decisions on the results of such analysis. Nor do they have a set of economic development goals that reflect the realities of different regions and the needs of North Carolinians.

The result is that the pursuit of ideological purity by eliminating all tax breaks no matter their public good often falls prey to the influences of various political forces that continue to carve out special tax breaks, often inconsistently.

As we noted in a recent piece on the options available to policymakers to address the revenue shortfall, a renewed look at tax code spending is needed. So too is a criteria and process for evaluating that spending against a set of shared and relevant goals for our economy.

NC Budget and Tax Center

New analysis from the Economic Policy Institute on the performance of wages across the distribution in 2014 finds that with few exceptions inflation-adjusted wages fell or stagnated for most groups. This isn’t anything new as there has been a long-term trend of wage stagnation that has meant the majority of workers are struggling to make ends meet even as they are contributing to grow the economy.

What is new and important from this analysis is what happened for wage earners at the bottom end of the wage scale. Workers in the 10th percentile saw their wages increase on an hourly basis by 11 cents or by 1.3 percent. The authors attribute this increase to the series of state-level minimum wage increases that have occurred in states in 2014 and which have bene proven to lift wages particularly for those at the bottom of the wage distribution. It turns out that nearly half of the country’s workforce lived in states where the minimum wage was increased in 2014.

For those states that haven’t raised the minimum wage, here is some further evidence of the real benefit of doing so. As the report author notes:

The great news in this story is that policy can actually affect the labor market. And, it is imperative that we use all the policy levers at our disposal to help rejuvenate the economy to create jobs and build stronger income growth for the 99%.

To read the full report, click here.

NC Budget and Tax Center

Yesterday, Lawrence Mishel from the Economic Policy Institute made the compelling case that policymakers have missed the mark by focusing on tax levels rather than wage stagnation in their pursuit of improving growth rates and the economic well-being of the majority of Americans.  As Mishel points out:

Wage stagnation is a decades-long phenomenon. Between 1979 and 2014, while the gross domestic product grew 150 percent and productivity grew 75 percent, the inflation-adjusted hourly wage of the median worker rose just 5.6 percent — less than 0.2 percent a year. And since 2002, the bottom 80 percent of wage earners, including both male and female college graduates, have actually seen their wages stagnate or fall.

At the same time, taxation does not explain why middle-income families are having a harder time making ends meet, even as they increase their education and become ever more productive. According to the latest Congressional Budget Office data, the middle 60 percent of families paid just 3.2 percent of their income in federal income taxes in 2011, less than half what they paid in 1979.

Mishel goes on to detail a policy agenda that is far better targeted than tax cuts for delivering benefits to the majority of American workers and the broader economy.  This agenda includes some familiar proposals also appropriate for state policymakers: addressing wage theft and misclassification, raising the minimum wage and protecting workers rights to collectively bargain.  It also includes important macro-economic and trade policy choices like stopping the offshoring of jobs through trade deals like the Trans-Pacific Partnership and ensuring the Federal Reserve holds interest rates down until wage growth is more robust.

Again in Mishel’s own words:

Contrary to conventional wisdom, wage stagnation is not a result of forces beyond our control. It is a result of a policy regime that has undercut the individual and collective bargaining power of most workers. Because wage stagnation was caused by policy, it can be reversed by policy, too.