Commentary, NC Budget and Tax Center

Powerful op-ed refutes Berger’s claims about a rosy NC economy

Be sure to check out NC Budget & Tax Center economist Patrick McHugh’s new op-ed in Raleigh’s News & Observer. In “As the NC GOP hails tax cuts, most incomes stagnate and poverty remains high,” McHugh offers a powerful rebuttal to a recent piece that appeared under the name of state Senate President Pro Tem Phil Berger, in which he attempted to claim that everything is going swimmingly with the North Carolina economy, thanks to GOP tax cuts.

Here’s McHugh:

Most families in North Carolina aren’t getting ahead in the way Berger is portraying it. The typical family income is slightly higher than it was in 2010 when we were just exiting the Great Recession, but the median income still buys less than it did at the turn of the Millennium. Our labor market is increasingly segregated between handsomely-paying white collar careers and low-wage jobs that don’t bring in enough to get by. We’ve lost many of the middle-income jobs that used to be the pathway from entry-level positions to a more comfortable life. Berger’s tax cuts haven’t fixed that problem.

The lack of good job opportunities has an even more devastating impact on communities and families trying to escape poverty. Our state has one of the highest rates of poverty in the country and last year (the most recent figures available) over 1.4 million North Carolinians were under the incredibly low threshold the Federal Government defines as the poverty line (less than $26,000 for a family of four).

Poverty is widespread but imposes a particularly harsh weight on some communities. One out of every five children in our state was in poverty last year, which should be enough in-itself to stop any elected leader from claiming their economic policies are working. We have also failed to dismantle the long-standing obstacles to opportunity which trap Black and brown North Carolinians in poverty far more often than their white neighbors.

North Carolina’s economic growth under the current tax cutting regime has been remarkably unremarkable. Job growth since 2010 has been identical to the regional average and slower than South Carolina and Georgia. The low tax mantra is also hard to square with the fact states along the West Coast which aren’t as allergic to taxing wealthy people and corporations added jobs faster than North Carolina over the last decade. Clearly having the lowest corporate tax rate in the country hasn’t propelled us to the lead of the pack.

Meanwhile, as McHugh points out, repeated tax cuts are devastating core state services and structures that boost the middle class. McHugh’ on-the-money bottom line:
Senator Berger isn’t alone in spinning stories to defend his policies. The real question is how much truth gets sacrificed, and the consequences to people whose lives are written out of the story.
Click here to read the entire essay.
Commentary, NC Budget and Tax Center

New numbers cause concern that NC economy is lagging and could slip backwards

In case you missed it earlier this week, the latest assessment from experts at the N.C. Budget and Tax Center indicates that care must be taken to prevent a state economic decline. This is from a release entitled “Worrying economic trends for N.C. persist in October labor market numbers”:

Uninspiring unemployment and labor market participation rates from October’s state labor market release suggest that the state’s economy is lagging and is in danger of slipping backwards in the coming months. The number of people looking for work in the state has exceeded 200,000 and is 20,000 more than October of 2018. The state unemployment rate of 4 percent is higher than the national average (3.6 percent) and is also higher than it was one year ago. These trends reinforce concerns that a slowing economy will exacerbate an incomplete recovery, leaving many North Carolinians in the cold.

Click for more labor market data charts

“As we approach the end of the year, it is obvious that North Carolina’s economy is not working for all,” said William Munn, Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center. “Worrying unemployment rate trends and slowing employment growth is evidence that 2019 is shaping up to be another year of lost opportunity and evasive prosperity, book-ending a decade of an incomplete recovery.”

Highlights from the October labor market release include:

  • The number of North Carolinians looking for work increased: There are more than 200,000 North Carolinians looking for work throughout the state, an increase of nearly 20,000 from October of last year. Comparatively speaking, the national number of unemployed has decreased over the past 12 months, from 6,112,000 to 5,855,000 . While this is an indication of a state labor market absorbing more eligible workers into the labor force compared to the nation, it still signals an economy unprepared for growth.
  • The North Carolina unemployment rate is higher than national average: Last month’s state unemployment rate of 4 percent is higher than it was 12 months ago at 3.7 percent. The U.S. unemployment rate of 3.6 percent represents an increase from last month, and while the state’s rate slid, there is still a notable gap.
  • The share of North Carolinians with a job has decreased since the Great Recession: Even as the number of workers in the state’s civilian labor force has grown over the past decade, the percentage of those with jobs has shrunk. In December of 2007, the state’s labor force numbered 4,530,400, and the share of employment was 62.1 percent. Last month, labor market data revealed that the state’s labor force increased to 5,128,600, but the percentage of North Carolinians with jobs slipped to 59.4 percent.

For data charts, visit NCJustice.org/LaborMarket.

For more context on the economic choices facing North Carolina, check out the Budget & Tax Center’s weekly Prosperity Watch report.

NC Budget and Tax Center

New data: Economy continues to leave rural areas behind

While much attention is being paid to the September national and state unemployment rates of 3.3 percent and 3.5 percent, one risks overlooking serious regional challenges that undermine the broader prosperity of North Carolina as a whole. September’s local and metropolitan labor market report revealed that 77 counties in North Carolina with unemployment rates the same or higher than September 2018, 51 counties with rates higher than the state unadjusted average, and 42 counties that have lost jobs since December of 2007.

Rural, eastern North Carolina is over-represented in this group of economically distressed communities. In fact, 26 of the 42 counties that have lost jobs since the beginning of the Great Recession are from these county groupings. The northeastern part of the state is host to a group of counties – Vance, Warren, Halifax, Edgecombe, Wilson, and Hyde – whose unemployment rates are all nearly 2 percentage points higher than the state’s September average. Also, counties on the state’s southeastern border with South Carolina – including Richmond, Scotland, Hoke, Cumberland, Robeson, Bladen, Columbus, and Brunswick counties – all have jobless rates at least one percentage point higher than the state average.  

In addition to the state’s highest regional concentration of high unemployment, eastern NC counties make up 26 of the 42 counties that have lost jobs since the beginning of the Great Recession. Three of the four are “Double whammy” counties: those that have jobs since December of 2007 and year-over-year are in the eastern part of the state. Martin, Vance, and Washington counties have lost nearly 6,500 jobs since the beginning of the Great Recession, a loss of 18 percent of the nearly 36,000 jobs combined from 12 years ago.

As the end of 2019 approaches there is no question that after 12 years the state has not recovered equitably. Too much of rural North Carolina is mired in economic distress that is not happening in many urban spaces. This imbalance leaves the entire state, and particularly rural communities, exposed to collective harm caused by natural disasters and economic downturns.

Will Munn is a Policy Analyst at the N.C. Budget and Tax Center.

NC Budget and Tax Center, News

STATEMENT FROM EXECUTIVE DIRECTOR RICK GLAZIER: Tricks with no treats for North Carolinians

RALEIGH (October 31, 2019) – The NC General Assembly leadership voted to leave Raleigh today after once again voting to slash taxes for big corporations while failing to give teachers and state employees the raises they deserve, leaving hundreds of thousands of North Carolinians without Medicaid coverage and failing to invest in thriving communities across the state.

Legislative leaders’ refusal to put forward a comprehensive final budget that addresses North Carolina’s ongoing needs puts our state on worse footing for the future.

After a session that saw underhanded sneak votes and the rejection of broadly popular policies to extend health coverage and improve public education, legislators are leaving many North Carolina families and communities behind.

Ignoring dramatic need and widespread popular demand, the legislature refused to expand Medicaid, leaving hundreds of thousands of low-income North Carolinians without coverage and threatening the survival of many rural hospitals.

This Halloween, the Republican leadership was all tricks and no treats.

By moving forward with legislative proposals, like the franchise tax cut that failed in House Finance but was revived by leadership late last night, legislative leaders have once again demonstrated their priority is big business, not everyday North Carolinians.

Bucking their prior stance against subsidizing the film industry, they moved to allow large film and television production companies to receive even more lucrative grants.

Despite rising public health concerns around vaping and the potential of parity in the taxation of these tobacco products at similar levels as cigarettes to address some of those concerns, legislative leaders listened to the tobacco industry and refused to act.

By expanding sales taxes on online purchases and not making up for it with other tax law changes, legislative leaders voted to keep our tax code upside-down.

To make matters even worse, legislative leaders passed tax cuts for big businesses while cynically claiming we couldn’t afford more healthy raises for educators. Leadership kept teacher pay raises far short of what is needed to retain and attract talent, undermining our children’s access to quality education. The proposed raise leaves teacher pay below its modest pre-recession levels, leaves teachers with a giant pay deficit compared to equally educated professionals in different jobs, and tries to pit teachers against other vital needs in the state budget.

The General Assembly has prioritized tax cuts for big business even as they have failed to enact a comprehensive final budget which creates a pathway to a stronger North Carolina. Once again, legislative leaders placed ideology and the demands of wealthy corporations over the needs of everyone else in the state.

Commentary, NC Budget and Tax Center

Budget & Tax Center: A costly cover for more business tax cuts in N.C.

Senate President Pro Tempore Phil Berger

In the same session that North Carolina senators approved a proposal to cut taxes for high net worth companies, lawmakers have also passed legislation increasing the standard deduction.

The stated reasons for doing so is that it will reduce taxes for everyday North Carolinians by increasing the threshold of income upon which the low flat income tax rate, 5.25 percent, is applied.  It will also, as proponents claim, mean fewer people will file income taxes.

The policy reasons for reducing the income tax rolls are limited. In the end, fewer people filing income taxes means fewer people are able to receive credits and deductions that could help them with the higher tax load they carry due to sales and excise taxes — not to mention rising property taxes at the local level.

The biggest problem with continuing to raise the standard deduction threshold is that a large number of North Carolinians claim the standard deduction rather than itemize.  By continually increasing the income threshold, we are delivering a costly tax break that is poorly targeted to families struggling to get by.  It is a policy that does less work than is needed right now to address the upside-down nature of the tax code.

Analysis from the Institute on Taxation and Economic Policy shows that 27 percent of the total net tax cut from the increase in the standard deduction will actually go to the top 20 percent, while just 7 percent will go to the bottom 20 percent whose income leaves them in poverty each year. Read more