Commentary

President Trump reveals the small-minded beliefs behind his immigration agenda, again

If you’ve already thrown your neck out shaking your head at the cavalcade of divisive vitriol emanating from the Trump administration, it’s probably best to stop reading now.

Multiple outlets are reporting that, during an Oval Office meeting on immigration, the President wondered aloud “why are we having all these people from shithole countries come here.” The disgusting remark was made in reference to people from Haiti, El Salvador, and several African nations that seek Temporary Protective Status (TPS) to work and reside in the United States because of natural disasters or other dangers in their home countries.

While you may have already heard about the President’s disrespectful comment, many people do not fully realize the importance of TPS to North Carolina. There are over 13,000 TPS holders in North Carolina, many of whom have American-citizen children, own homes, and have become deeply integrated into the social fabric of our state. Ending TPS could cost North Carolina’s economy over $570 million annually, break up families, and undermine communities across the state.

Sadly, this kind of invective is nothing new from a President who stokes racial hatred like it’s his favorite party game. It’s particularly easy in this case to see how the President’s uncharitable attitudes translate into policy decisions that hurt people that don’t fit his definition of what makes America great. It was only a few days ago that the Trump Administration decided to end TPS for people from El Salvador, thereby putting thousands of lives at risk and ignoring Salvadorans’ many contributions to our nation and our economy.

If you are fed up with shameful attacks on immigrants and their families, please respond to this action alert and tell our leaders in Washington DC to enact rational and humane immigration policy.

NC Budget and Tax Center

Devastating consequences if Congress fails to replace DACA in three months

Ever since the Trump administration decided to end DACA (Deferred Action for Childhood Arrivals) in September, tens of thousands of North Carolinians’ lives have been plunged into turmoil. It is now up to Congress to pass a viable long-term solution, or risk tearing families apart, undermining our economy, and throwing a wrench into public finances.

Dream Act would grow North Carolina’s Economy

The simplest solution is to pass the Dream Act, legislation that would codify the basic deal that DACA offers to undocumented immigrants brought here as children who commit to furthering their education and staying out of trouble with the law.

In addition to the stability and opportunity each “DACAmented” individual would obtain through a legislative fix, analysis by the Center for American Progress estimates that passing the Dream Act would increase North Carolina’s long-term economic output by at least $550 million per year, an impact that could grow to almost $2 billion annually if at least half of the people eligible for DACA pursue higher education.

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Commentary, NC Budget and Tax Center

Republican tax plan could fuel offshoring and automation, killing manufacturing jobs

In the dog days of summer in 2003, people in Kannapolis and neighboring towns northeast of Charlotte got news that over four thousand people working for Pillowtex were losing their jobs. Several hundred more in Concord got the same news, along with other communities outside of North Carolina. It was the largest single-day layoff in North Carolina history, and an event that had a lot to do with the enactment of NAFTA.

Some of that painful episode, and many like it across North Carolina, could be repeated if current Republican tax plans become law.

Two provisions of Republican tax plans currently being considered in Congress could accelerate offshoring and automation, the two chief reasons that manufacturing employment in the United States has been on the decline for more than a generation.

First, a proposal currently being debated would create new incentives to keep or move manufacturing overseas. The shift to a “territorial” tax system would allow multinational corporations pay little or no corporate taxes on profits realized outside the U.S., a move which could fuel another wave of offshoring, cut the legs out from underneath purely domestic manufacturers, and ultimately kill manufacturing jobs. The existing tax code already allows companies to avoid taxation by keeping profits outside of the United States, but some current proposals could make the problem even worse.

Companies looking to avoid the U.S. corporate income tax could move or keep their manufacturing operations out of the country, raising the specter of another wave of offshoring like that which followed the implementation of the NAFTA. Some versions of the bill include language meant to limit companies’ ability to engage in this type of behavior, but many experts think the provisions are not nearly strong enough.

While this provision has not received a great deal of media attention yet, it worries both academic experts and leaders from manufacturing states that understand the threat it poses. The Congressional Research Service has raised this concern citing both economic theory and empirical evidence that adopting a territorial system in the United State could push investment out of the country.

Republican Senator Ron Johnson from Wisconsin has also expressed his misgivings, saying that “with a territorial system, there will be a real incentive to keep manufacturing overseas.” Senator Johnson’s perspective is all the more striking given that he often favors lower taxes but has thus far refused to support the current tax plan because it lavishes so many tax advantages on multinational corporations to the detriment of local manufacturing firms.

All of that should be worrisome enough to manufacturing communities in North Carolina that have still not recovered from previous waves of offshoring, but the trouble might not stop there.

Another arcane provision, known as “full expensing” could accelerate the process of replacing people with machines on shop floors. Automation is nothing new in manufacturing, and has allowed the United States to remain competitive in many sectors even when going up against low wages abroad, but the simple fact is that it costs jobs in the short-run.

Full expensing allows companies to deduct the full value of new machinery in the year in which the investment is made, rather than spreading the deduction over years as the equipment depreciates in value. This accounting trick would make the tax advantages of buying equipment far greater, creating even more pressure to invest in machines instead of people, potentially accelerating the pace of automation in manufacturing and other industries.

Territorial taxation and full expensing are not the only worrisome tax ideas on offer in Washington these days, but they should be particularly alarming to communities in North Carolina that rely on manufacturing.

We should be looking to strengthen domestic manufacturing, but this specific spread of tax cuts for multinational corporations isn’t the answer. Several pieces of the current tax plan could simply add weight to the forces that have slammed manufacturing communities for decades, and we know how that turns out.

NC Budget and Tax Center

Want a better economy? Make sure wealthy residents pay their fair share

States that require wealthy residents to reinvest in their communities did better over the past decade, according to a new report from the Institute for Taxation and Economic Policy. States that collect more income taxes from wealthy people generally outperformed their peers that chose to give their most fortunate residents a comparative pass on supporting public goods between 2006 and last year—contrary to claims made here in North Carolina and nationally to justify tax cuts that primarily benefit the wealthy.

“Lawmakers who support reducing or eliminating state personal income taxes typically claim that doing so will spur economic growth. Often, this claim is accompanied by the assertion that states without income taxes are booming, and that their success could be replicated by any state that abandons its income tax. To help evaluate these arguments, this study compares the economic performance of the nine states without broad-based personal income taxes to their mirror opposites—the nine states levying the highest top marginal personal income tax rates throughout the last decade.

The study’s broad finding is that the states with the highest top tax rates are experiencing more favorable economic conditions than the states without income taxes. While this finding does not indicate that higher income tax rates necessarily cause economic growth, it does call into question the notion that cutting or abandoning state income taxes leads to a clear improvement in state economies.”

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Commentary

State legislature targets retiree health benefits for teachers and state employees

Buried in the fine print of the final budget is a provision that will eliminate retiree health benefits for teachers and other state employees hired after 2021, a move that is both unnecessary and unwise.

This is an extreme solution for a moderate problem. North Carolina could do a better job of preparing for the future costs of retired state employees’ healthcare, but there is no immediate crisis that necessitates extreme measures. Analysts at the General Assembly and State Treasurer Dale Folwell have noted that there are many ways to financially strengthen the state retiree healthcare system so it can continue delivering lifesaving care for retired public servants. If you accidentally wade through some poison ivy, it may be uncomfortable and require some ointment, but that doesn’t mean that you just amputate the injured leg and move on.

This change will ultimately make it harder for North Carolina to attract skilled and committed people into public service. State employees and teachers have long grumbled about a series of policy changes that have made it harder to do their jobs, and more of a hardship to work for the people of North Carolina. Justin Parmenter, a language arts teacher in Charlotte, wrote in the News & Observer that he fears that public service is already falling out of favor with North Carolina’s young professionals, “as teacher salaries have stagnated, additional pay for master’s degrees has been revoked and insurance premiums have steadily risen, our state’s 15 public universities have experienced a 30 percent decrease in education students over the past few years.” This trend will not destroy public services overnight, but in the long run it can dramatically weaken our ability to deliver quality education, build a modern economy, protect public safety, and otherwise keep the proverbial trains running on time.

It’s also rash to make this dramatic of a change without knowing where healthcare policy is headed at the federal level. Many of the healthcare changes being contemplated in Washington could directly impact our options for providing care to retired state employees and the quality of care that is available through different avenues. We have no idea how potential federal changes could impact how fast healthcare costs grow, whether funding for Medicaid and Medicare will be chopped, or if new systems to deliver healthcare to retirees will be developed. With all of this uncertainty swirling around the healthcare system in the United States, it’s just not the time to make the far-reaching changes that this could prove to be.