Overview of the Senate budget proposal

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May 20, 2013 at 4:17 pmCategory:NC Budget and Tax Center

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Late last evening, the Senate leadership released their proposed $20.6 billion budget for FY2013-14. This proposal fails to fully invest the slight uptick in revenues into the public priorities that ensure better opportunities for all children, help get North Carolinians back to work, and rebuild the middle class.

Furthermore, by linking this proposal to their revenue-reducing tax plan, Senate leadership fails to lay a foundation for a strong economy and thriving families and communities. Over the biennium, the Senate tax package would reduce available revenues by $217.1 million in FY2013-14 and $553.1 million in FY2014-15. As we mentioned last week, these tax cuts would primarily benefit the wealthiest residents and corporations and would extend well beyond the next biennium.

As illustrated in the chart below, the Senate proposal for FY2013-14 would increase spending by 1.7 percent over the base budget. Yet, spending would drop by .1 percent and 8.5 percent, respectively, compared to the Governor’s proposal and pre-recession levels (FY2007-08, adjusted). Read More…

Disparate treatment of working families compared to wealthy in proposed tax plans

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May 15, 2013 at 3:24 pmCategory:NC Budget and Tax Center

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Lawmakers are considering various tax plans that would either convert North Carolina’s personal income tax to a flat rate or phase it out altogether, while making the state more reliant on the sales tax. The result would be a tax shift on the majority of North Carolinians, hitting especially hard those at the bottom of the income ladder.

Legislation already inked into law this session signals that moderate- and low-income working families are not at the top of lawmakers’ list of priorities. In mid-March, the Governor signed a bill to axe North Carolina’s Earned Income Tax Credit (EITC). Unless lawmakers reverse course, nearly 907,000 working families—most of them with children to support—will face a tax increase beginning in tax year 2014. Read More…

House committee OKs failed idea that would dismantle North Carolina’s key investments

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May 9, 2013 at 3:17 pmCategory:NC Budget and Tax Center

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Earlier this morning, members of the House Committee on Government approved the so-called Taxpayer Bill of Rights (TABOR) bill, which is a constitutional measure that would impose a crippling and arbitrary formula to determine how much we spend on key investments. TABOR would force huge, annual cuts to education, public safety, health care, and other key services that support our economy and quality of life.

TABOR is a solution in search of a problem. North Carolina already has a limit on General Fund spending tied to the projected total state personal income. This limit is tied to what North Carolinians can afford and the health of the economy, preventing expenditures from rising rapidly. But unlike TABOR, it allows North Carolina to regain ground lost during the recession so we can avoid permanent damage to our most important assets. TABOR would lock in the extremely low-levels of spending that have resulted from the Great Recession and harmed our schools, roads, and communities and hampered our ability to recover from the economic downturn. Read More…

Earned Income Tax Credit is worth saving according to the Tax Foundation

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May 8, 2013 at 9:33 amCategory:NC Budget and Tax Center

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Elizabeth Malm, an economist with the conservative Tax Foundation, yesterday voiced support for the Earned Income Tax Credit (EITC) at a debate about tax reform in North Carolina, highlighting how out-of-touch North Carolina’s leadership is when it comes to its treatment of working families in tax reform efforts.

The EITC, which goes to families that work but struggle to get by due to low wages and helps them pay for basic necessities, has received backing from politicians of all stripes over the years including President Ronald Reagan. It’s not hard to see why since this modest tax credit reduces child poverty, improves kids’ chances of success as adults, and lessens the need for public assistance.

Ms. Malm’s backing of the EITC stands in stark contrast to the actions of Governor McCrory and legislative leadership, who already gave the OK to reduce the state EITC in tax year 2013 and eliminate the tax credit thereafter. This misguided decision will result in a tax hike on more than 900,000 of North Carolina’s lowest-paid workers and their families. Read More…

The long-term benefits of the Earned Income Tax Credit

May 3, 2013 at 4:33 pmCategory:NC Budget and Tax Center

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Research has long shown that the Earned Income Tax Credit (EITC) for working families significantly encourages work—especially among single mothers—and reduces child poverty more than any other existing policy tool. Although the EITC is largely a temporary support, new research by the Center on Budget and Policy Priorities indicates that this tax credit generates broader benefits that extend well into adulthood for the recipients’ young children. These children perform better in school, are more likely to go to college, and earn more when they reach adulthood.

For instance, a $3,000 boost in income from the EITC during a child’s early years is associated with a boost in educational achievement that is equivalent to an extra two months of schooling. And as illustrated in the infographic below, a boost in income from the EITC during a child’s early years can contribute to a significant increase in earnings in adulthood as well as increased work activity for individuals between the ages of 25 and 37. Read More…