NC Budget and Tax Center

Speaker Ryan’s first tax cut bill for the wealthy: The American Health Care Act

There is much merit to arguing the problems with the American Health Care Act with regards to its failure to value human life and access to health care.  As a health care bill, it fails miserably.  As tax policy, it is equally disastrous.

Make no mistake: While wreaking havoc on the health care system and undermining the health and well-being of our neighbors, Congress plans to cut taxes for the wealthy and raise the costs for everyone else.

The repeal of two Medicare taxes paid by high income earners will primarily benefit millionaires.  These taxes also achieved greater equity in the treatment of unearned income under the tax code.  Repealing those two taxes would mean that a couple making $10 million would see their effective tax rate cut in half.

The changed structure of the tax credits will mean North Carolinians, on average, will see a more than $5,000 loss in help to pay their health care premiums.  In fact, the drop for the average consumer in North Carolina ranks us second in the nation.  This will likely mean that North Carolina will be hardest hit by increasingly unaffordable health care and also the likelihood of a rise in the number of uninsured costing everyone.

More detailed analysis of the tax credit provision shows that the House’s tax credit structure will primarily benefit North Carolina consumers in more urban counties and those who are younger.

The Kaiser Family Foundation has a series of interactive maps analyzing the impact on North Carolinians in different income and age groups.  Many reports have pointed to the nationwide findings:  Older, low-income and rural people will lose the most.  This is because of the tax credits as well as various other provisions of the House’s plan that allow older people to be charged more, eliminate help for out-of-pocket medical expenses and remove the individual mandate. Read more

NC Budget and Tax Center

Tax cap amendment would lock in tax cuts for wealthy and profitable corporations

Yesterday the Senate Finance committee voted to move forward a bill that would amend the state Constitution to cap the income tax rate at the low and arbitrary rate of 5.5 percent. The bill will ensure that the tax cuts for the wealthy and profitable corporations since 2013 will remain permanent. It will lock in the cuts to public schools, health and services that promote thriving communities.

It is fiscally irresponsible to limit the choices of future lawmakers as they seek to meet the needs of a growing state and changing economy.  The result over time is likely to be more cuts to core public services and increases in other taxes that ask more from middle- and low-income North Carolinians.

Here are a few key flaws with locking into the state constitution the income tax rate: Read more

2018 Fiscal Year State Budget, NC Budget and Tax Center

Why won’t North Carolina leaders think long-term?

Governor Cooper announced a clear vision for where North Carolina should aim: one of the top 10 most educated states in the country, an attractive place for people and business, and a state that supports the health and well-being of all residents.

Thinking long-term isn’t the norm for many leaders in North Carolina. Many argue that it’s the nature of elected officials to think in terms of their next election cycle. That may be part of the answer, but a very practical issue exists in North Carolina:  We literally can’t afford to think long-term.

Included with the Governor’s recommended biennial budget that was released last week is a chart that projects out the state’s revenue and anticipated expenditures over the next five years. The chart provides a troubling picture of just how close we are budgeting, even as we fail to meet all our existing needs. By 2021, revenue collections for North Carolina are anticipated to be $100.7 million above anticipated expenditures. These anticipated expenditures account for enrollment growth in public schools and Medicaid, costs of maintaining capital investments, paying debt obligations and maintaining a commitment to get teacher pay to the national average.

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2018 Fiscal Year State Budget, NC Budget and Tax Center

Governor’s budget proposal invests in higher education, workforce training

The Governor’s budget continues investments in the education pipeline beyond K-12 education so that North Carolinians have access to the training and education that prepares them for the workforce and participation in civic life.  The post-secondary budget comprises investments in the state’s Community College system and the UNC Public University system. Here are five things you should know about what Gov. Cooper proposes.

  1. The basics are covered by fully funding enrollment growth. The Community College system projects an increase in enrollment over the next fiscal year, the first since 2012, requiring $8.3 million in investment. The UNC system also projects two years of enrollment growth that is fully funded by the Governor’s proposal ($46.5 million and an additional $48.1 million respectively). Various efforts are funded to ensure that students in both systems are also in classrooms with adequately compensated faculty, including the UNC Faculty Retention Fund ($3 million) and salary increases for faculty.
  2. Post-secondary education is made more affordable through investments in need-based aid, scholarships and tuition is held steady. No additional increases in tuition at Community Colleges or the UNC system are proposed after years of increases. The Governor has also prioritized making post-secondary education more affordable through investments in the UNC Need Based Aid program (an additional $2 million); fully funding the NC Promise Tuition plan for UNC Pembroke, Western Carolina University and Elizabeth City State University ($11 million of lottery dollars in the second year of the biennium); and two new programs in the second year of the biennium: NC Grow ($19.4 million of lottery dollars) and the NC Best and Brightest ($5 million of lottery dollars) programs.  NC Grow would provide a “last-dollar” scholarship to all eligible graduates of a North Carolina high school to cover the cost of community college tuition and fees. NC Best and Brightest would establish a new forgivable loan program for high achieving students who pursue undergraduate education degrees and agree to teach in an NC Public school upon graduation.
  3. Workforce training is prioritized through evidence-based investments. The Governor proposes the first significant commitment of state dollars to workforce programs since the recovery began. The investments would use lottery dollars to fund continuing education courses at the same level as curriculum courses ($15 million in each year), provide financial assistance to those seeking industry credentials up to $1,000 per student ($2.5 million in the first year and an additional $2.5 million in the second), double the number of NCWorks career coaches in high schools ($1.1 million in the first year, $1.8 million in the second), provide start-up funding for new specialized workforce programs ($3 million in each year), and fund the support services that have been proven to increase completion rates at both Community Colleges and UNC.
  4. Research and broader connections of community colleges and universities to economic opportunity are funded. The Governor expands support for the translation of research and development into market opportunities ($2 million), supports University centers targeting fields of work like bio-pharmaceuticals and food processing that present growth opportunities and invests in health services and education that reach the surrounding communities.
  5. Measuring performance of post-secondary investments. The Governor also proposes investments that would allow taxpayers and policymakers to better understand the effect of a community college education on wages ($3 million in each year), would study the true costs of workforce programs to ensure they are fully covered in current funding allocations, and develop the information technology systems in the UNC system to monitor student success and institutional performance (one-time investment of $11.9 million in the first year, and a total of $11.5 million in second year).

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2018 Fiscal Year State Budget, NC Budget and Tax Center

Statement from Budget & Tax Center on Governor Cooper’s budget

Statement from Alexandra Sirota, Director, Budget & Tax Center

Governor Cooper has laid out a vision that serves as a positive step toward a higher quality of life for more North Carolinians and communities while seeking to reclaim our national reputation as a state committed to building opportunities and an economy for all.

Rather than follow arbitrary flawed formulas, the Governor has recognized the range of needs in communities and for families and put together a pragmatic plan to respond as a state.

The Governor emphasized, in particular, the role of public employees and teachers in delivering high quality services across the state, as well as the importance of a fortified education pipeline from birth to career in driving better economic outcomes. He acknowledged that public policy can make sure health care, housing and child care are affordable and accessible. He has set aside savings for future Rainy Days while also making additional modest investments in rebuilding those communities hit hard by natural disasters last year.

Governor Cooper could have made even greater progress toward realizing the goal of a thriving North Carolina if his decisions weren’t constrained by the tax cuts that have primarily benefited the wealthy and profitable corporations since 2013.

To sustain and build upon the Governor’s first steps toward a thriving North Carolina, it will be critical that all of our state leaders commit to ensuring the tax code is able to meet the state’s long-term needs and doesn’t continue to ask more from those living on middle and low incomes.