This blog post is one in a series detailing President Obama’s budget proposal for fiscal year 2013.
Most of the attention on President Obama’s proposed tax changes in his 2013 budget proposal has focused on his proposal to sunset the Bush tax cuts for household income above $250,000 per year and his long-term goal of using the “Buffett Rule” to replace the Alternative Minimum Tax.
Looking beyond the headlines, however, reveals some proposals that have relevance for future tax reform efforts at the federal and state levels.
On the personal income tax, for example, President Obama proposes to reduce the value of many income-tax exclusions and deductions for high-income Americans. Under the current system, the value of these exclusions and deductions are significantly higher for high-income households than lower-income households: $1 in such deductions and exclusions reduce the tax liability of high-income households by up to 35 cents, compared to 10-25 cents for low- and middle-income households.
The president’s proposal, originally part of his American Jobs Act, would cap the value of those exclusions and deductions at 28 cents on the dollar for high-income households. Similar proposals to reduce the value of tax subsidies for wealthier households at the state level could raise tens to hundreds of millions of dollars in additional revenue for North Carolina without raising income tax rates.
Also among the President’s proposed tax changes are provisions that would close some of the most egregious corporate tax loopholes. For instance, Obama’s proposed budget would eliminate a loophole that allows corporations to deduct interest expenses from overseas investments even when indefinitely deferring US taxes on the income from those investments. Read more
A news story that aired on Raleigh’s NBC-17 News last night claimed to offer a “reality check” on how budget cuts affected teaching jobs in North Carolina’s public schools.
Unfortunately, the story left viewers with a mistaken impression that North Carolina’s public schools have weathered recent budget cuts without losing many teaching positions. Although the story is correct to note that 534 teachers were laid off this school year, in addition to 1,260 teacher assistants (based on August 2011 data), layoffs are less relevant than positions lost when looking at the impact of budget cuts on North Carolina’s public schools.
According to the latest data from the NC Department of Public Instruction (NC DPI), North Carolina’s public schools (excluding charters) have 15,497 fewer full-time personnel this year compared to three years ago. Just under one in three of those position losses (4,840) occurred in the last year, and seven in ten of those lost positions since 2009 are the result of fewer teachers (5,134) and teaching assistants (5,738). Read more
If you’re looking for an insightful, big-picture overview of the Obama administration’s 2013 budget plan, you would be hard-pressed to find a better place to start than a statement released this afternoon by the President of the Center on Budget and Policy Priorities, Robert Greenstein.
Greenstein’s statement makes a key point that should put to rest some of the deficit hysteria that’s already accompanied the release of the new budget plan: the Obama administration’s budget would stabilize the federal debt over the next decade through a balanced mix of spending reductions and additional revenues.
The whole statement is worth reading, but here are the top-line messages:
The President’s budget would, if enacted, make significant progress in reducing deficits, although policymakers would have to take further steps, especially for future decades. Under its economic assumptions, it would achieve what most budget analysts, and all recent bipartisan commissions or panels, have identified as the crucial fiscal goal for the decade ahead — stabilizing the debt so that it no longer rises faster than the economy. Read more
As often happens to committee-agenda items scheduled last, the General Assembly’s Revenue Laws Study Committee ran out of time today before members could consider proposed legislation to repeal North Carolina’s estate tax.
According to the committee’s chair, Senator Rucho, consideration of the legislation, including testimony by the Budget and Tax Center and the NC Center for Nonprofits, will be rescheduled for the committee’s next meeting in March.
Under the proposed legislation, North Carolina would no longer levy an estate tax after 2012 regardless of what happens to the federal estate tax in 2013, when the federal estate tax is, by law, set to return to its pre-Bush-tax-cut parameters. Read more
Once again, North Carolina ranks near the bottom (44th) of the Tax Foundation’s annual rankings of its State Business Tax Climate Index (SBTCI).
The appropriate response of North Carolina policymakers and residents to the state’s poor ranking should be: “Who cares?”
First, measuring poorly on the Tax Foundation’s business tax climate index does not mean that North Carolina’s businesses are paying a lot in state and local taxes. In fact, businesses in North Carolina are, on the whole, paying significantly less in state and local taxes as a share of the state’s economy than in almost any other state:
Second, the Tax Foundation’s SBTCI is simply an arbitrary formula based on a mishmash of 118 tax policies the Tax Foundation doesn’t like, regardless of whether those policies are considered sound tax policy. Read more