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When making important decisions, people have a right to the best possible information. Facts, not ideology, should drive our policy agendas. This is especially true on budget and tax issues, which affect everyone in North Carolina.

Unfortunately, John Hood’s recent column on the NC General Assembly’s tax changes is replete with bad information. Warning: some wonky details follow.

The Budget & Tax Center uses rigorous methods and accurate modeling strategies that are endorsed and used throughout the economic forecasting industry – including by conservative and centrist groups.

Here’s the thing about making tax changes: there will always be winners and losers.  That’s why it takes careful thought, engagement of a diverse set of stakeholders and consideration of a range of data points and methods. Efforts to establish a reasonable estimate of what will happen as a result of the plan will always be estimates, but policymakers should have the best information available to them as to the direction and magnitude of the impact of their decision.

In the current tax debate, policymakers had two separate types of analysis at their disposal.

  • The sample taxpayer scenarios developed by the state’s Fiscal Research Division. This gives examples of how particular taxpayers will fare under tax changes.  These can be fine tools, but are inherently limited. They pick out particular taxpayers and can’t show you that everyone – or even most people — will have the same experience. The results can’t be extended to everyone in particular filing types, and certainly not­­ to the population at large.

Using this tool alone, as tax plan backers did, is like trying to fix your car using only a screwdriver. Yet even using this limited tool shows that proponents’ claims that everyone will benefit from tax changes is flatly false. That’s right, according to non-partisan Fiscal Research, and even according to the conservative Tax Foundation, there will be taxpayers who pay more under the tax plan.

  • The other type of tool that policymakers could use was an economic incidence model, like the kind that the Joint Committee on Taxation uses, that has been developed by the Institute on Taxation and Economic Policy. The Budget & Tax Center used this model to provide population-level estimates of the impact of tax changes. This is a far better tool than the limited sample scenarios, since it provides an overall summary of the experience of all taxpayers.

Analysis showed that the bottom 80 percent of taxpayers would experience a tax increase on average.  The findings take into account the rough swap of electricity and natural gas from the gross receipts franchise tax to the sales tax, as well as the privilege tax changes for amusements. The findings take into account a household’s total income in order to reflect ability to pay the tax.  The findings also take into account the base broadening of the sales tax.

The model is consistent with real-world experience. First, consumers will pay more indirectly because of changes businesses make to their prices to accommodate for the sales tax changes. The Council on State Taxation — not a group one would call a bastion of progressive views — finds that 40 percent of total sales tax collections are paid by businesses. Second, multi-state, profitable businesses — the bulk of corporate income taxpayers — are going to pass their tax cut on to shareholders, not workers. Those shareholders are very unlikely to all be North Carolinians, meaning that money will flow out of our state.

Record corporate profits have not translated into higher wages for the past thirty years, so why would we assume that a corporate income tax cut is going to all of a sudden give corporations a change of heart and decide to boost their workers’ wages?

In desperation, proponents often turn to the argument that this is going to create jobs.  But not only is there no economic consensus that this is a good strategy for growth, states that have tried it have not seen the promised employment expansion – though they have seen high incidence of poverty. We can’t import the oil production capacity of Texas or the coal mines of Tennessee, so why should we import their model that drives poverty through the roof?

When we juxtapose these two decisions — huge tax cuts for the wealthy versus a “just wait, it’ll all work out” message for working families – we can see the human cost of a serious policy mistake. Pretending that economic evidence supports these choices just compounds that serious mistake.

 

 

[Note: the following post comes to us from Caitlin Breedlove, co-director of Southerners on New Ground].

By Caitlin Breedlove, SONG Co-Director

As an LGBTQ person, I think what is happening at the North Carolina legislature affects our community deeply. I want LGBTQ people to be involved in fighting back against this repressive legislation because I think it is the right thing to do, but also because it deeply affects us. In the past few months, we have seen terrible changes in North Carolina– the cutting of Medicaid for half a million North Carolinians who are poor and working poor. Attacks against voting rights, our schools, healthcare rights for poor people, and the demonizing of immigrants. These are LGBTQ issues. They impact LGBTQ people deeply. Here is how*:

Poverty: Children raised in Lesbian, Gay and Bisexual families are twice as likely to grow up in poverty as kids raised in heterosexual households. Rural and African-American LGB people are even more likely to live in poverty, and lesbians are consistently more likely to be living in poverty than heterosexual women

Immigration: It seems simple, but thousands of immigrants are also LGBTQ people.

Medicaid: For the first time, low-income LGBT Americans have access to Medicaid. Failing to expand Medicaid under the Affordable Care Act, deprives hundreds of thousands of low-income North Carolinians, including low-income LGBT North Carolinians, from access to health care.

Voting Rights: Read More

If ever there was a day that highlighted how much we need affordable energy, it was today. Speakers from AARP, NAACP, Consumers Against Rate Hikes and the Justice Center spent some time in the wind and cold to call attention to rising utility costs — and their consequences for working families.

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Rochelle Sparko, a consumer and housing attorney with the Justice Center, made the following remarks this morning about proposed rate hikes for Duke and Progress Energy.

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Rochelle Sparko
Feb. 8, 2013

Thank you for inviting for me to speak today.

I work with the NC Justice Center, a nonprofit whose mission is to build opportunity and prosperity for all. As we move forward to plan our next two decades of energy policy, it is crucially important we consider the needs of North Carolina’s low-income working families.

Each year, about 250,000 North Carolina homes are cut off from their utility services. This is a devastating outcome in the best of times. During a cold winter or a hot summer, these consequences can be life-threatening. If we’re serious about doing right by our working families, we have to consider utility rates. Rising costs can wreak havoc on a family budget.

And the issue of utility costs is of special importance for working families today. This is a uniquely dangerous time for low-income people in North Carolina. We continue to have unemployment numbers cresting 9 percent statewide – rates that are much higher in certain areas. This year, lawmakers also plan to cut benefits for jobless workers and to reject a Medicaid expansion that would help low-income families.

Even in a good economy, hundreds of thousands of people face disconnection of their utilities due to poverty. In a tough economy, where 1.7 million North Carolinians live in poverty, the problem is both more widespread and has a greater impact.

Imagine the city of Raleigh going dark. Imagine that suddenly, 415,000 people in our state’s capitol were without heat and light.

The same thing is happening in our communities every year, where a population greater than the city of Raleigh is forced to go without those basic necessities.

If we plan wisely, we can create a sustainable energy future over the next 20 years. I believe that with judicious planning, we can pave the way to a North Carolina where Raleigh never has to go dark.

But if we fail, the consequences will be severe – and they will fall heaviest on those least able to bear them.

 

 

 

 

This morning, a coalition of groups launched a campaign against proposed rate increases for North Carolina’s electric utilities. Speakers gathered in front of the NC Housing Coalition’s offices: see excerpts from the event here:

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Last week, the General Assembly’s Revenue Laws Study Committee met to consider changes to the state’s corporate tax rules that could put a serious dent in the corporate tax revenues needed to pay for public schools, community colleges, Medicaid, and other vital public investments in the coming years.

The bottom line (as explained in this space before) is that a subset of profitable multi-state corporations are pushing to be absolved of past abuses of corporate tax shelters whereby these corporations used accounting games to shift taxable profits earned here in North Carolina to no-tax states like Delaware and Nevada. If these corporations get their way, the result could be a $350 million windfall for a few dozen profitable corporations paid at the expense of everyday North Carolinians and locally-owned businesses.

Why would lawmakers even be considering such a costly giveaway?

As the video below shows, the complexity of corporate tax laws gives Washington, DC-based lobbyists with corporation-funded groups like the Council on State Taxation the opportunity to convince lawmakers to make innocuous-sounding changes that would have costly consequences. A better path would be combined reporting, which ensures all corporations pay their fair share.

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