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Amid the uncertainty over whether Congress will agree to an extension of the payroll tax holiday, one thing is certain (or at least as certain as things get in economics):  extending the payroll tax holiday for another year would provide a significant and much-needed boost to the nation’s economy.

As we’ve written before, “the key to kick-starting an economy that’s currently stuck in neutral is to restore the buying power and confidence of American consumers, thereby ensuring businesses that they will continue to have a growing market for their goods and services.”

Failure to extend the current payroll tax holiday would cost the average North Carolina family almost $1,000 next year at a time when the economy’s prospects for a strong recovery appear slim. Economists estimate that extending the payroll tax cut next year could create between 400,000 to 1 million new jobs across the country. That could translate into 12,000 to 30,000 jobs in North Carolina, if North Carolina’s economic benefits from the payroll tax holiday were to align with the state’s 3-percent share of the nation’s economy.

To put that in figure in perspective, North Carolina’s economy only added 12,000 total jobs over the past year (from October 2010 to October 2011).

Although there is considerable evidence that direct spending and refundable tax credits targeted to low-income and middle-class families provide more bang for the buck for creating jobs, Congressional Republicans and some Democrats have resisted approving most of the direct-spending measures included in President Obama’s American Jobs Act.  If tax cuts are among the only job-creation tools left capable of attracting bipartisan support, Congress would be well advised to act quickly on extending the payroll tax holiday for another year.

The US Senate Permanent Subcommittee on Investigations released a new report this week confirming that a proposed tax amnesty for offshore corporate profits would repeat an “embarrassing failure” by providing a windfall to multinational corporations while doing little to create jobs.

What the new report indicates is that a substantial portion of multinational corporations’ offshore earnings are really only identified as offshore to avoid paying taxes.  The report surveyed 27 of the largest multinational corporations with a combined total of $538 billion in tax-deferred profits identified as offshore.  What the survey found is that nearly half of the profits identified as offshore were actually held in US bank accounts or invested in US financial assets.

The results of the survey refute corporate tax amnesty proponents’ claims that US-based multinationals have more than $1 trillion in profits  ”trapped” overseas because those corporations would have to pay federal corporate income taxes on those profits if brought into the US.

Given this evidence, plus the reams of research indicating that the proposal would prove ineffective at creating jobs, the report authors recommend against enacting a second corporate tax amnesty,

because undistributed accumulated foreign earnings are not trapped offshore. U.S. corporations are already investing nearly half of those foreign earnings in U.S. assets without paying any U.S. taxes on them, allowing those corporations to reap benefits from the U.S. financial system without paying the tax dollars needed to support that system. Enacting still another corporate repatriation tax incentive would further exacerbate that tax unfairness.

 

A new BTC Brief released this morning demonstrates that, by any reasonable measure, state funding for core services like education, health and human services, public safety, and other general government services is historically low.

For nearly four decades, state funding for core General Fund services like public schools, community colleges, universities, mental and physical health, and public safety typically hovered between 6 and 6.5 percent of the combined total of all North Carolina residents’ annual incomes.  As shown in the chart at right, the new state budget represents a major departure from recent historical precedent.

The consequences of this reduced commitment to state public investments have already started to become clear: fewer teachers and teacher-assistants in the classroom, longer waiting lists for child-care subsidies, higher tuition and fewer classes for university and community college students, and the potential elimination of vital health services for elderly, disabled, and indigent North Carolinians. Read More

Last night, the US House of Representatives voted mostly along party lines to reduce the maximum length of unemployment benefits from its current level of 99 weeks to only 59 weeks by next summer in high-unemployment states, including North Carolina.

The US Department of Labor estimates that 180,505 North Carolinians would lose unemployment benefits compared to a full extension. That’s more than in all but four other states.

At a time when there are 4.25 officially unemployed persons per job opening across the country, cutting the length of unemployment benefits takes away a vital economic lifeline for families at a time when there simply are not enough jobs for everyone who wants one.

Dramatically reducing the length of unemployment benefits not only hurts the families of unemployed workers, it hurts the entire economy:  the National Employment Law Project estimates that the House’s cut to unemployment benefits would cost at least 140,000 jobs next year, with job losses coming disproportionately from states already suffering from high unemployment. Read More

Cross-posted on Prosperity Watch

In November of 2010, North Carolina’s unemployment rate fell to 9.8 percent, the first time in nearly three years that North Carolina’s unemployment rate did not exceed the national rate.

One year later, the US unemployment rate fell in November to 8.6 percent. The most recent estimate for North Carolina, from October, put the state unemployment rate at 10.4 percent.

 

 

 

 

 

 

 

 

 

 

 

 

 

What happened over the past year that caused North Carolina’s unemployment rate to rise even as the national unemployment rate fell? Read More