State lawmakers constantly claim that they are looking out for average North Carolinians. However, actions speak louder than words and proposed tax changes that the state Senate aims to enact is a good example. The tax changes would further shift the tax responsibility to low- and middle-income taxpayers and away from the wealthy and profitable corporations.

As part of the proposed tax changes, the Senate would target cash-strapped homeowners by requiring them to pay state income tax on mortgage debt forgiven by lenders, even though no actual cash is provided to the homeowners. Another proposed tax provision would no longer allow students and families to deduct expenses for tuition and related expenses such as course textbooks, supplies, and equipment.

These two proposed tax changes were excluded from the House version of the bill; however, the Senate has not budged and has kept these tax changes in its package of proposed tax law changes. Consequently, while many North Carolinians continue to await their Carolina Comeback amid an uneven recovery and a steady increase in the cost of a college education, state policymakers are essentially saying “tough luck”.

In contrast, the same Senate bill includes a tax break for businesses that fall on bad luck. The proposed tax change would allow businesses that experience economic losses (e.g. they don’t make a profit), potentially as far back as 30 years, to carry forward those losses to reduce profits generated in the years ahead. Rather than ensuring that profitable corporations pay their fair share, this tax change does the opposite.

The disturbing reality is that North Carolina’s tax system favors the wealthy and profitable corporations at the expense of average North Carolinians. Whereas distressed North Carolina homeowners who were preyed upon by unethical lenders are punished as a result of receiving much-needed consumer relief, profitable corporations are provided tax breaks in the event they fall on hard times.

Such tax changes contribute to the making of North Carolina’s upside-down tax system, which work to shift the tax responsibility to low- and middle-income taxpayers and away from the wealthy and profitable corporations.

NC Budget and Tax Center

As my colleague highlights in a recent blog, the governor’s proposed budget for the next two years fails to meaningfully reinvest in critical public structures, such as public education, that drive the state forward. This reality becomes much clearer when placing the governor’s budget into broader context.

Consider state funding for textbooks and other classroom-level resources for public schools. The governor’s proposed budget for FY2016 provides a small boost of $35 million in state funding for textbooks and other classroom-level resources. This spending increase partially restores harmful cuts state lawmakers have enacted since 2011 and is a step in the right direction. However, this is a textbook example of how the state can spend more but still fall short of what is needed to catch up and keep up with the needs of a growing student population.

Even with the proposed additional spending for textbooks, classroom materials, instructional supplies, and equipment, total state funding would be around half of the state’s investment level prior to the recession (see chart below). Furthermore, the proposed funding boost provided in the Governor’s budget is barely half of what the Department of Public Instruction requested on behalf of children in the classroom.




When presenting his proposed budget last week, the governor acknowledged that his budget is “still extremely very tight” and that tough choices had to be made. This is the result of his decision to sign into law tax cuts that are costing upward of $1 billion per year – a self-inflicted reality that continues to drive underinvestment in public schools and other core areas of the state budget. North Carolina’s public schools play an important role in building a workforce that can compete for good-paying jobs in a dynamic 21st century. Failure to adequately invest in core public structures today will have a direct impact on the state’s future economic prospects.

NC Budget and Tax Center

Students in high-poverty schools across North Carolina are showing up to class each day with food in their stomach and ready to learn thanks to an initiative known as Community Eligibility.  As part of the nationwide Community Eligibility Program (CEP), schools within 54 school systems across the state are providing breakfast and lunch to all students free of charge. Some districts have adopted CEP in all of their schools.

North Carolina is the fifth hungriest state in the country, so providing healthy school meals at no cost to students and families is especially important for children – particularly those in our most distressed communities. As North Carolina continue to face the challenges of persistent poverty and ensuring that all students are afforded a high-quality education, access to nutritious school meals serves as a positive step forward.

The initial rollout of CEP in North Carolina has been promising. Nearly half of all public schools eligible to participate in CEP adopted the initiative for the current school year, representing more than 310,000 students (Click here to see a list of CEP-eligible, participating schools). This is wonderful news! Only two states in the south – Tennessee and Georgia – have more students attending schools that are participating in CEP. Read More

NC Budget and Tax Center

Senate Bill 20 passed another hurdle this morning, moving out of House Finance and to the floor for a full vote.  As I recently highlighted, state lawmakers are pursing tax changes that would further shift responsibility for paying for public investments and services to low- and middle-income taxpayers and away from the wealthy and profitable corporations.

Senate Bill 20 includes a provision that would no longer allow taxpayers to deduct expenses for tuition and related expenses such as course-related books, supplies, and equipment. The federal tax code includes this deduction, but state lawmakers are proposing that the deduction be done away with.

Eliminating this deduction would come at a time when North Carolina students and families have seen a steady increase in the cost of a college education. And this trend will likely continue, as another round of tuition increases look to be on the horizon for students attending public universities in the state. Meanwhile, state funding for need-based financial aid has not increased in recent years, meaning students likely have to incur increasing amounts of student loan debt. Read More

NC Budget and Tax Center

State lawmakers have introduced House Bill 117 (HB 117) that pushes for more tax cuts that benefit corporations, even as the state faces an ongoing revenue shortfall resulting from the tax plan passed in 2013.

State lawmakers would like to change an arcane tax provision that determines the amount of state income taxes paid by corporations. The state’s current tax system uses a formula that considers a corporation’s property, payroll, and sales in North Carolina. However, the tax change – referred to as single sales factor (SSF) apportionment formula – would only consider the sales component for certain corporations.

Proponents of this tax change claim that it will boost capital investment in the state and create more jobs. However, as BTC has highlighted before, this claim is not supported by real-world evidence. What will happen, however, is a further reduction in revenue available for public investments and services that businesses depend and rely on.

Here’s a quick recap on why North Carolina should not shift to a SSF apportionment formula: Read More