Commentary, NC Budget and Tax Center

Coming Trump/Ryan tax proposals promise giveaways to the rich; hard times for North Carolina

Donald Trump speakingAs my colleagues have detailed over the past few weeks, President Trump’s budget blueprint proposes significant cuts to major programs and funding that support economic opportunity, health and well-being of North Carolinians. These cuts will allow the President to pursue increases in defense spending.

They are also required if the President and Speaker Ryan are to pursue the kind of overhaul of the federal tax code that would reduce revenue significantly over time. As has also been noted, much of the discussion of the federal tax changes has also been tied to the repeal of the Affordable Care Act where savings from reducing health care coverage are hoped to allow for the depth of tax cuts desired.

While we wait for the details on federal tax changes from President Trump and Congress, it is useful to review past proposals. These proposals have included reducing the corporate income tax rate and eliminating the alternative minimum tax for corporations, reductions in personal income tax rates and transfer tax as well as elimination or capping of itemized deductions and increases in the standard deduction among many other changes.

Here is what analysts have found in reviewing these proposals.

  1. The tax plan Trump put forward during his campaign would increase the federal debt by $20.9 trillion by 2036.
  2. The “Better Way” tax plan proposed by Speaker Paul Ryan would reduce the effective tax rates for the most well-off Americans by 8 percent, a change that is four times bigger than the change in effective tax rates for any other income group.
  3. Both tax plans represent a significant tax cut for the top 1 percent of taxpayers.
  4. The Border Adjustment Tax proposal for how the US would tax corporate profits would be regressive, fail to end offshore tax avoidance and violate trade agreements.

Because North Carolina’s tax code is tied to the federal code in various ways, the changes at the federal level will have an impact on states’ revenue collection and who pays. It is difficult to say exactly what the end result for North Carolina would be not least because the state has changed so much of its tax code in recent years. However, as ITEP writes, from eliminating the estate tax to treatment of capital gains and interest to “ending the deductibility of state and local taxes, creating a new deduction for child care expenses, changing the taxation of carried interest, altering expensing of business investments, and other corporate tax changes such as “border adjustment” could all have ripple effects on state revenue systems.”

Most notable in the overall assessment of the current federal tax code proposals is that it will become less progressive. And that means many North Carolina taxpayers will face an even heavier tax load given the already regressive nature of the state’s tax code today.

Commentary

Governor Cooper is underselling his teacher pay plan

Amidst the clamor over the General Assembly’s unfunded class-size mandate, Governor Cooper’s teacher pay plan has fallen from the North Carolina education headlines. However, teacher pay will certainly return to the forefront over the coming months as the North Carolina Senate and House release their budget proposals. As a result, it’s important to have a firm understanding of the Governor’s proposal.

The Governor described his proposal as a two-year effort to increase teacher salaries by 10 percent. For year one, FY 2017-18, the Governor proposes investing $271 million in teacher raises to provide what he described as “a more than 5% average increase for teachers in 2017-18.” Additionally, the proposal would eliminate the misguided “tier system” established in 2014-15 that only provided guaranteed raises to teachers every five years.

Teacher salary proposals are among the biggest state budget items each year, and deserve outside, independent analysis. Last year, Governor McCrory and General Assembly leadership were incredibly dishonest in their description of their teacher pay plan. General Assembly leadership absurdly claimed that their plan would bring average teacher salaries above $50,150, a claim repeated by the Lieutenant Governor and on countless campaign commercials. Governor McCrory centered his campaign on the equally-false claim that he met his promise to bring average teacher salaries above $50,000. Of course, these claims were provably false at the time, and average teacher pay remains below $50,000.

Thankfully, Governor Cooper has taken a more honest approach. If anything, he’s under-selling his plan. Read more

Commentary

Help us figure out where lawmakers stand on one very basic question

In case you missed it, in the aftermath of the repeal of HB2, NC Policy Watch has launched a new and simple, but very important initiative. We are looking to identify areas of common ground that may provide avenues for progress in this controversial area of North Carolina public policy.

Current state law makes it illegal to fire someone because of their race, religion, color, national origin, or sex, but does not include sexual orientation. Given the growing interest in amending state law to close this gap, we are polling all 170 members of the North Carolina General Assembly to gauge their attitudes on one simple and straightforward question:

Do you think it should be legal or illegal to fire employees because they are gay?

Policy Watch reporters have reached out to all 170 legislators, but many have not responded. Because we believe it’s important to hear a definitive answer from every Senator and Representative, we are leaning on our progressive community to help find the answers.

  • Check out the list of Senator and Representative responses to see if your county’s legislators have responded yet (find yours on our map)
  • Ask the question via email, phone, or in person: Do you think it should be legal or illegal to fire employees because they are gay?
  • Use our interactive form to submit the answers you are given

Click here to visit the “Where do your legislators stand?” page on our main website.

Click here to report your findings!

Commentary

The best editorial of the weekend

In case you missed it yesterday, the Greensboro News & Record had another fine editorial that takes the General Assembly to task yet again for its latest unwarranted power grab in the state courts system. As NC Policy Watch reporter Melissa Boughton reported last week, state lawmakers have advanced an array of bills in recent weeks that seek to remake the courts for partisan purposes and without any meaningful input from legal experts or court officials themselves.

As the N&R editorial notes, Gov. Cooper should get out his veto pen:

“The legislature swatted the other two branches of state government at once last week — quite a feat, even for this overly aggressive body.

House Bill 239 reduces the N.C. Court of Appeals from 15 judges to 12 through attrition. The next three who leave the bench won’t be replaced.

The measure was approved with the support of all Republicans in the House and Senate over opposition from Democrats.It denies Democratic Gov. Roy Cooper the chance to fill vacancies, starting next month when Republican Judge Doug McCullough reaches the mandatory retirement age of 72.

Two more Republicans, Robert N. Hunter Jr. and Ann Marie Calabria, would be next to retire, both in 2019.

Cooper could be expected to replace all three with Democrats if he had the opportunity.

Partisan politics aside, this move will have a major impact on the state’s appellate courts — and it was made without consultation with judicial officials. That creates the strong suspicion that the changes were not made with partisan politics aside.”

And here’s the conclusion:

“HB 239 also would route more appeals from the District and Superior Courts around the COA and directly to the Supreme Court. The high court’s workload probably isn’t excessive now, but too many additional cases could produce a backlog. What many Democrats fear is that Republican legislators want to create an emergency on the Supreme Court, which Republicans could use to justify enlarging it. Currently configured with seven justices, the Supreme Court is authorized by the state constitution to have as many as nine.

It so happens that the Supreme Court has a 4-3 Democratic majority. Republican legislators tried to add two Republican justices last year, but then-Gov. Pat McCrory said he stopped the move. Lawmakers could try again, giving themselves the authority to make the additional appointments for the purpose of building a 5-4 GOP majority.

All this richly justifies Cooper’s expected veto of HB 239. Changes to the court of this magnitude should be undertaken only after careful study with participation by judicial branch officials and representatives of the state’s legal community. This has the appearance of partisan politics and nothing else.

The courts are meant to be a co-equal and independent branch of state government. Their job is to protect the rights of the people by providing a check on the power of the executive and legislative branches.

The legislature is claiming too much power for itself, and it shouldn’t get away with swatting the other two branches in one bold stroke.”

Commentary, News

The Week’s Top Five on NC Policy Watch

 

1. Almost absolute power is corrupting in Raleigh, absolutely

Here is something you may not know about the way the General Assembly works these days.  The odds are that your senator and representative have almost no say in what happens to controversial legislation. None.

This week when the Senate considered a proposal from the House to combine the state ethics and elections commissions, taking power away from Governor Roy Cooper, Senators were banned from offering any amendments to the power-grabbing plan.

That’s because House leaders didn’t introduce a bill of their own to change the law, they simply took a bill that had already passed the Senate, stripped out its contents and replaced it with the proposal to merge the elections and ethics commissions.[Read more…]

2. Competing bills would alter method for funding charter schools

For the better part of a decade, charter and traditional school advocates have bickered over charters’ share of North Carolina dollars.

But two bills drafted by influential state Senate leaders in recent days want to settle the issue this session. One, Senate Bill 562, has the blessing of public school advocates; the other, not so much.

“If Senate Bill 562 were to move forward, I think you’d see a much more collaborative approach between the charter schools and the traditional schools,” says Bruce Mildwurf, associate director of government relations for the N.C. School Boards Association, a group that lobbies for local school board interests at the state legislature. [Read more…]

3. The return of the “Know Nothings”
Anti-immigrant fervor spawns destructive (and utterly illogical) proposals on Jones Street

There are a lot of labels that have been applied to the ideology that has held sway in North Carolina policy and politics over the past six years. Some have been embraced by the politicians and pundits who have been running the show (“conservative,” “libertarian,” “fundamentalist” stand out) while others (“reactionary,” “backward-looking,” “right-wing”) have not.

Of course, such labels are rarely static and can, over time, come to mean something very different from the original. There was a time in the United States in which “liberal” was widely understood to be a moniker for those who opposed government participation in the economy.[Read more…]

4. Full speed ahead: GOP lawmakers plow ahead with plans to remake the state court system

It’s starting to look like “court-packing” may not be as dead in the water as some Republican lawmakers said it was in December.

The General Assembly passed House Bill 239 this week, which would reduce the Court of Appeals from 15 judges to 12 and add more than 100 cases per year to the state Supreme Court’s workload. Gov. Roy Cooper plans to veto the legislation.

“The Republican effort to reduce the number of judges on the Court of Appeals should be called out for exactly what it is – their latest power-grab, aimed at exerting partisan influence over the judicial branch and laying the groundwork for future court-packing,” states a press memo from his office.[Read more…]

5. Local officials breathe sigh of relief as federal court strikes down legislature’s Greensboro redistricting plan

When a federal judge ruled last week against a state law that reconfigured and redistricted the Greensboro City Council, it was celebrated in the Gate City. But the larger implications of the ruling weren’t widely discussed.

But Greensboro Mayor Nancy Vaughan, who spearheaded the legal and popular resistance to the law, said the ruling was more than just a victory for Greensboro. It was more than a win for one of the state’s most liberal cities in a two year struggle against the conservative North Carolina General Assembly.

“I think it was a very important decision for the state of North Carolina,” Vaughan said this week. “It reaffirmed the ability of cities to determine their form of government. Importantly, it offers the citizens the ability to have a referendum, to have a voice in what their government looks like. That’s something they were trying to do away with here – and if it had been successful, it’s something a number of other towns and cities would have seen.” [Read more…]

Upcoming event on Tuesday, April 18 @ 8:30am:
Crucial Conversation breakfast – Immigration policy in the era of Trump: Where do things stand in North Carolina?
NC Policy Watch presents a special Crucial Conversation breakfast: Immigration policy in the era of Trump: Where do things stand in North Carolina? What is the reality “on the ground”? Learn more and register today.