NC Budget and Tax Center

A federal budget that reflects our values

Friday is the deadline for Congress and President Trump to put forward a long-term plan to fund the government and the essential services that the federal budget funds in communities across the country including here at home in North Carolina.  Now with a potential deal that would provide $1.375 billion in funding for border security measures, it appears that there could be a long-term funding agreement signed by the deadline.

Of course, this deadline and the entire saga that resulted in human and economic costs for North Carolina was avoidable.  The impacts of the first federal shutdown that ended on Jan. 24 affected federal employees, contractors, those North Carolinians engaged with federal programs and services, state agencies administering programs and services and visitors and businesses in our state.

But even more damaging is the lasting effect on the budget process and our democracy.  The funding of core government services, programs, and employment was held hostage to the demand for funding one specific priority of the President: the building of a wall on the country’s southern border.

With a compromise made that will spend $1.375 billion of taxpayer money on a symbol of exclusion with limited value to the integrity of our country’s immigration system, it is worth asking what precedent this sets for the process going forward and what priorities these dollars could have instead been committed to.

$1.375 billion could have:

  • Provided maximum Pell grant awards to 267,770 people across the country,
  • Ensured 499 million more meals each year were available to hungry families,
  • Connected 205,443 children and their families to the assistance needed to afford a quality early learning experience
  • Trained 311,791 workers for jobs of the future

Our federal budget, like our state budget, is about priorities and what we value.

In light of the recent raids that have occurred in our state in the past two weeks, North Carolinians are all too aware that ICE enforcement does not just occur at the border, and that it can hit where people feel the most safe and secure – in their homes, at their workplaces, and in front of their children’s schools.  The notion that a wall will serve as a cure-all for our immigration system or correct  years of missed opportunities for comprehensive immigration reform as a nation rings even more hollow now.

Indeed, the taxpayer dollars that are proposed to be spent on the wall could instead serve to strengthen our immigration system by doubling existing funding for immigration courts to reduce backlogs and increase efficiency in the process. Those dollars could provide universal legal representation to ensure every immigrant, regardless of income, has access to counsel. Alternatively, the funds could be utilized to fund the integration and support of children of immigrants already in the United States to ensure their economic and social mobility through early childhood programming and  affordable higher education.

As long as our elected leaders advance the notion that monuments to exclusion and displays of force should trump common-sense measures and sound investments that strengthen our communities, we should be clear that we are far from realizing our values as a nation.

NC Budget and Tax Center

Veteran academic to discuss NC’s racial wealth gap

The N.C. Budget and Tax Center will host its latest “Economy for All” event next Wednesday, February 20 in Durham. The event will feature Professor Sandy Darity, who is a professor of Economics, Public Policy, and African and African American Studies at Duke University. He will discuss the state of North Carolina’s racial wealth gap and what we can do to foster equity.

This is the official invitation from the Budget & Tax Center:

“Each year the Budget & Tax Center, a project of the North Carolina Justice Center, hosts a talk on economic issues in our state.  Under the banner of Economy for All, this event seeks to shape current debate about the role of public policy in advancing more equitable economic outcomes and informing the general public about the issues that we must address to fully realize our potential for greater well-being.

This year, we would like to invite you to join us to hear from Professor Sandy Darity about his extensive work on advancing an equitable economy in our country and the policy choices that can make that possible.”

Here are the event details:

Date: Wednesday, February 20, 2019

Time: Networking reception from 5:30p – 6:15p and discussion panel from 6:15p – 7:30p

Location: The Boiler Room (320 Blackwell St #101, Durham, NC 27701)

Click here to check out the event Facebook page and RSVP.

NC Budget and Tax Center

State ‘millionaires’ taxes’ can fund key investments without harming state economies

State income tax increases on high-income residents can raise substantial revenues for investments in people and communities and are more likely to boost long-term productivity than harm short-term economic growth, according to a new report from the Center on Budget and Policy Priorities (CBPP).

The facts about state millionaires’ taxes

  • States have increased their top income tax rates without harming their economies.
  • Over the last 18 years, 15 of the 20 major studies examining states’ income taxes found little to no effect on their economic growth.
  • Millionaire tax flight is uncommon and, therefore, does not weaken state economies. Less than three percent of millionaire households moved to new states in a given year.
  • High-income tax increases can help North Carolinians afford investments that decrease racial inequities, build economic opportunity, and spur growth, such as high-quality education, improved support for low-income families, and better roads and other infrastructure.

Millionaires in North Carolina have been benefiting from tax cuts since 2013. Before then, there was a graduated rate structure on personal income that taxed higher incomes at higher rates. In the first round of tax cuts in 2013, that was reduced to a flat tax rate of 5.75 percent. Since then, the tax rate has continued to be reduced and as of January 1, 2019, it stands at 5.25 percent.  Since 2013, 75 percent of the net tax cuts have flowed to the top 1 percent of income earners in North Carolina; the average annual income for those taxpayers during that time was nearly $1 million.

As of November 2018, there is now a cap of seven percent on income tax rates in the state constitution. Millionaires are the primary beneficiaries as they receive more than 50 percent of the total net tax cut from the inability to raise rates to prior levels on higher income.  A millionaires’ tax in North Carolina at the capped seven percent rate could raise revenue for meaningful investments that ensure our children are ready to learn and reading by 3rd grade, connect people to health care, and allow our workers to upgrade their skills for emerging industries.

Commentary, Education, NC Budget and Tax Center

Report: Early childhood is worth the investment for N.C.

A new report from the National Institute for Early Education Research released last week confirms that North Carolina’s early childhood ambitions haven’t matched the commitment of funds needed to achieve it.

Like studies before it, the researchers find overwhelming evidence that North Carolina has designed a uniquely effective program for preparing four-year-olds for Kindergarten, 3rd-grade reading, and, indeed, life.  And yet, the ability to reach all those who would be eligible and fully realize the benefits has been arbitrarily limited by under-funding from North Carolina lawmakers.

The report finds in particular that:

  • 47 percent of eligible four-year-olds are served by the NC Pre-K Program.
  • Both urban and rural communities are not meeting the needs.
  • Funding for slots alone will not close the gaps; 44 counties declined expansion funding in recent years.

The report lists important recommendations around recognizing the full costs of delivering the program, accurately measuring county-level preschool needs, and establishing goals that push us all to commit to reaching more children.

However, certain recommendations could be improved. In suggesting changes to the reimbursement rate, the report misses the opportunity to specifically recommend the state move to a market-based analysis of the cost of early childhood programs.  Such a method would take into account the cost of additional teacher salary, facilities, and instructional materials and supports for children, rather than just utilize the cost of tuition.

In suggesting the state integrate NC Pre-K into funding formulas for K-12 public schools, the researchers fail to acknowledge the existing K-12 funding challenges in the state and the potential harm that could be done by shifting more programming needs onto a funding formula and system that is substantially underfunded.

But the report’s largest oversight is ignoring the key piece in the puzzle explaining why our early childhood programs continue to struggle to be accessible, equitable, and high quality. State policymakers continue to prioritize wasteful tax cuts for wealthy North Carolinians and corporations over proven investments in early childhood programs. These tax cuts have reduced state revenue by $3.5 billion per year.

North Carolina could easily meet all of the report’s goals if state lawmakers prioritized early childhood over tax cuts for big companies and wealthy taxpayers. The roughly $530 million needed to get the program to full enrollment could be raised if incomes over $1 million were taxed at 7 percent – a rate that would still leave their taxes lower than they were in 2013. Alternatively, a similar amount could be generated by taxing corporate profits at rates similar to South Carolina’s 5 percent.

As the CEOs who sponsored the launch of the report recognize, early childhood is worth the investment.  What better way to start to apply the findings of the report than for them to publicly call for corporate and income tax rates that would enable our state to give every four-year-old the opportunity to thrive?

Alexandra Forter Sirota is the director of the N.C. Justice Center’s Budget & Tax Center. 

NC Budget and Tax Center

Temporary re-opening of government is no solution

Last Friday afternoon, the President announced he would support a bill that would temporarily open the government until Feb. 15. Quickly following the announcement, both the House and Senate moved forward legislation to approve this measure and the President signed the bill late Friday evening.

The temporary re-opening of government agencies will allow federal workers to return to work and receive back pay while lawmakers continue to negotiate a longer-term funding proposal.  Still on the table and strongly desired by the President is funding for the proposed southern border wall that precipitated the original shutdown.

The re-opening of government is an important first step in recognizing both that the federal government provides critical services such as protecting air travel and providing food assistance to families, and that federal workers, like all workers, play a critical role in the functioning of our economy.  

It is important to note that bouncing back will not be easy and that:

  • Some government agencies will face long backlogs that will take weeks, if not months, to address.  
  • Uncertainty remains such that programs and services for those Americans (and North Carolinians) most in need should likely continue to prepare contingency plans should government shutdown again.
  • Economic damage has been done.

Given the temporary nature of the measure and the seeming lack of change in positions in the original debate, this measure does not take away the possibility of a future shutdown (or an emergency declaration for that matter). Both have been threatened should Congress not approve the border wall that President Trump has demanded.  

In that way, our communities remain under the threat of a fundamental shift in the way that our budget priorities are negotiated — where now shutting down the government and services delivered across the country is on the table. It should never be — especially not as a way to strong-arm racist and unpopular policy.