NC Budget and Tax Center

NC Budget and Tax Center

For Throwback Thursday, the Senate is relishing in old school ideas.

Case in point, a bill was filed today to further cut income taxes for profitable corporations and continue to reduce the flat income tax rate that benefited the wealthiest taxpayers the first time around. It is an eerily similar approach as the legislation passed in 2013, which is now hurting our state and economy.

Income tax cuts like the one proposed in today’s throwback are not the answer to the state’s economic challenges. Just ask Senator Brown who is working to secure additional sales tax revenue for rural counties that have been hit hard by the 2013 tax changes which ultimately reduced state investments in public schools and economic development. Take a look at the academic research which finds no consensus on tax cuts benefiting the economy through job creation or increased incomes. Or consider the experiences of states’ like Kansas where income tax cuts have not delivered a boost in jobs or wages but have resulted in cuts to core services.

The continued pursuit of income tax cuts will not boost North Carolina’s economy, it only serves to further reduce revenue that pays for services that people rely on each day, like our schools.  Preliminary estimates suggest the cost of this bill would be $1 billion, on top of the nearly $1 billion price tag of the tax changes passed in 2013.

One major beneficiary of these tax cuts will be profitable corporations.  Read More

NC Budget and Tax Center

Food assistance for vulnerable communities would be slashed deeply under budget resolutions that the US House and Senate budget committees approved last week. The cuts would likely increase hunger, thrust more people into poverty, and push families that are poor even deeper into poverty. Considering that North Carolina has the 5th highest level of food insecurity in the nation, the proposals would deliver a huge blow to North Carolinians living paycheck to paycheck and struggling to provide food to their families.

Under the House plan, the SNAP program—formerly known as food stamps—would be block-granted and cut by at least $125 billion, or one-third, between 2021 and 2025, according to experts at the Center on Budget and Policy Priorities (CBPP). There is some flexibility in terms of how states would be able to carry out the deep funding cuts. If states decided to rely solely on benefits cuts, the average SNAP recipient would face a $55 per month cut in food assistance. For a family of 4 that cut is about $200 a month—or worth about one-quarter of a very low-cost meal plan. States could also turn to eligibility cuts and reduce income limits to achieve the cuts. Either way, cuts of this magnitude will bring harm to families, children, and other vulnerable groups.

North Carolina would lose at least $3.8 billion in food aid over those five years. That would force North Carolina policymakers to make some very difficult decisions about whose food assistance to reduce or terminate, impacting many Tar Heel families who already find it difficult to pay the bills and meet their most basic needs. Read More

NC Budget and Tax Center

State lawmakers once again turned their back on hardworking North Carolinians who struggle to support themselves and their families with low wages.

Yesterday, just before the House Finance Committee was scheduled to debate an economic development bill, House Bill 89, the sponsor stripped out a provision that would have reinstated the state Earned Income Tax Credit (EITC), a tax break that helps thousands of North Carolinians who work at low-wage jobs. North Carolina’s EITC expired at the end of 2013 when state lawmakers failed to extend it, and this economic development bill would have been the perfect opportunity to bring it back.

The EITC is widely recognized as one of the most effective anti-poverty tools nationwide, especially for children. Nearly 907,000 North Carolinians claimed the state EITC for tax year 2012, benefiting nearly 1.2 million children and providing a $108 million economic boost to local communities across the state.

Slide1

The bill sponsor, Rep. Moore, informed House Finance Committee members that the state EITC provision was excluded from the revised bill in order to increase the chances of the bill gaining bipartisan support among state lawmakers. Read More

NC Budget and Tax Center

After several states including North Carolina challenged the extension of Deferred Action for Childhood Arrivals and the Deferred Action for Parents of Americans a preliminary injunction was issued holding up implementation of these immigration directives with the potential to reach 5 million immigrants without documents nationwide. While the issue is considered in the courts, the delay has real human, fiscal and economic costs.

As the Center for American Progress notes in their analysis:

The Council of Economic Advisers, or CEA, estimates that the November executive action providing deferred action to low-priority individuals will increase the national gross domestic product, or GDP, by nearly $60 billion over the next decade. In the aggregate, CEA estimates that the immigration directives will increase the GDP by $210 billion. As CAP demonstrated in a recent report, payroll tax revenues will increase $22.6 billion in five years and the solvency of the Social Security system will increase by $41 billion over 10 years as workers earn higher wages…State and local economies also stand to benefit immensely from the executive action.

Indeed, there are clear benefits to state and local economies to ensuring that these low-level undocumented immigrants can work and care for their families free from fear of deportation. As we have written about in the past, North Carolina is poised to benefit economically from these policies both through increased labor force participation and tax revenue. Not only are there estimated to be increases in state tax revenue but their participation in local economies as consumers is also important. That is in part why thirty-three mayors have filed an amici brief to urge the courts to lift the injunction: leaders of cities know that immigrants make an important contribution to their vibrancy. Read More

NC Budget and Tax Center

It bears repeating that the first rule of climbing out of a hole is to stop digging. But some policymakers obviously haven’t learned that lesson. They are pushing more tax cuts for those who need them least, even though revenue for schools and other priorities is coming in below projections because of tax cuts that have already gone into effect.

Last week Senator Berger laid out a tax plan that would allow profitable corporations to escape some of their responsibility for supporting the public services that benefit their businesses and the stability of the broader economy. The plan would do nothing to address the uneven recovery from the last recession, which has done nothing to boost the wages of most North Carolinians.

The senator said he will propose another round of corporate income tax cuts: reducing the rate to 3 percent from 5 percent by 2017 and changing the way profitable corporations account for their income for tax purposes. and Profitable corporations have already seen their tax rate drop from 6.9 percent, at a cost of nearly $350 million. Dropping the rate to 3 percent would mean roughly $500 million in additional revenue lost to the state’s schools, public health care and courts, to name just a few of the core public services that support opportunity for everyone in the state.

There is little hard evidence to support Senator Berger’s claim that corporate income tax cuts are a good strategy for boosting the state’s economy. Tax cuts to profitable corporations flow to shareholders and thus cannot be guaranteed to stay in the state and generate economic benefits for North Carolina. Read More