This afternoon, Governor McCrory released his $20.99 billion 2015 fiscal year budget for the period that runs from July 2014 to June 2015. His proposal creates more problems than it solves, failing to take prudent steps that would put North Carolina’s budget on a more sustainable path. Similar to his budget proposal last year, his new spending proposal follows suit and fails to catch up—let alone keep up—with the needs of kids, working families and communities in many areas of the budget.

The Governor’s budget was constrained in major ways—which were self-imposed by state lawmakers last year when they decided to cut taxes. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June). The driver of these revenue shortfalls—despite an economic recovery—is the series of tax cuts that Governor McCrory signed into law last year that was already estimated to drain available revenues to the tune of $437.8 million in the 2015 fiscal year.

As we reported last week, estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million next fiscal year.

Yet, rather than prudently recommending the halting of future tax cuts that are scheduled to go into effect in January 2015, the Governor chose to keep this next round of tax cuts in place despite the diminished revenue picture. As we warned last year, North Carolina cannot afford to pay for tax cuts that primarily benefit the wealthy and profitable corporations at the expense of teacher layoffs, growing waiting lists for critical public services, and higher tuition rates.

State spending under the Governor’s proposal would continue to remain well below pre-recession levels, as illustrated in the chart below, even though spending over the base budget would slightly increase. All areas of education funding fall short of what was called for in the continuation budget. Tax cuts are making it harder to regain lost ground. Read More

Some underling and troubling trends are revealed in the Fiscal Research Division’s newly released third Quarterly General Fund Revenue Report, which provides an assessment of revenue for the state. Not much has changed since the Division’s second quarterly report. Both reports foreshadow some of the particular challenges of the new tax plan—namely the fact that tax rate reductions for profitable corporations will be big revenue losers for the state.

On net, the General Fund was $12.1 million above the $14.5 billion revenue target for the first-three quarters of the current fiscal year that ends in June 2014. This marks a reduction from the $83 million point-in-time “surplus” that accrued by the end of the second quarter. The gap could shrink even further by the end of the month depending on any volatility in revenue collections post-tax season—a factor dubbed as the “April Surprise.”

Revenue collections were ahead of target by the end of the third quarter largely due to stronger-than-expected performances by the sales tax and the corporate income tax on net. Read More

Unless lawmakers reverse course, nearly one million North Carolina families will claim the state Earned Income Tax Credit (EITC) for the last time this tax season—one year after Gov. McCrory signed a bill ending the tax credit, according to a new report from the NC Budget and Tax Center.

In 2013, North Carolina lawmakers put an end to the state EITC, which helps low-wage workers keep more of their income so they can afford basic necessities, like child care, while pursuing deep tax cuts that primarily benefit wealthy individuals and profitable corporations. Combined with the income tax cuts that benefit the wealthy, the loss of the state EITC tilts the tax system even more out of balance. The state’s tax system already asked more from low- and middle-income families than it did from those earning the most, and this makes the disparity even worse. The resulting tax shift is neither true tax reform nor good for North Carolina’s economy. Read More

Yesterday, President Obama released his fiscal year 2015 budget proposal that includes several important improvements to the pro-work Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). When taken together, these improvements will reduce poverty among low-wage workers and their families, reduce income inequality, strengthen work incentives, and give a boost to North Carolina’s economy—all without adding a dime to the deficit.

Under the President’s proposal, approximately 381,000 low-wage workers without children in North Carolina would get a much-needed income boost. Currently, a childless adult working full time at the minimum wage pays significant federal income and payroll taxes, but receives an EITC of less than $30. In fact, childless workers are the sole group of workers that the federal tax system actually pushes below the poverty line, according to the Center on Budget and Policy Priorities.

Fortunately, the President’s proposal would reverse course and boost tax fairness by expanding the now-tiny EITC for childless workers, an idea that has growing support across the political spectrum. The proposal would also make workers between the ages of 21 and 25 eligible who are currently excluded from qualifying for the EITC. Read More

PlaceMattersBTC

 

 

 

 

This blog post is part of a series called Place Matters. The other posts can be accessed here and here

Imagine living in a community that includes the most undesirable and hazardous amenities a place has to offer such as a waste transfer station, a sewage treatment plant, and several landfills. Now, imagine being represented by county officials who decide to provide water and sewer services to an animal shelter but not to the residents—who happen to be more than three-quarters African American. And, these facilities primarily serve the majority-white residents in adjacent communities. Unfortunately, the residents of Royal Oak in Brunswick County don’t have to imagine this; they face this reality every day.

Majority-minority* and low-income Tar Heel communities face widespread environmental injustices—and environmental racism—that harm residents’ overall health and economic security. Such exclusion is exposed in a UNC Center for Civil Rights report, The State of Exclusion: An Empirical Analysis of the Legacy of Segregated Communities in North Carolina. Read More