NC Budget and Tax Center

Another month, another underwhelming jobs report for North Carolina. The Tar Heel state created fewer jobs and saw a smaller percentage of unemployed workers find employment than the rest of the nation over the last year, according to the February jobs report released by Division of Employment Security this morning.

The numbers tell a clear story: 2013 was a rough year for the state’s labor market. While the state saw its payrolls expand by 65,000 new jobs (1.6 percent) since March 2013, this represents slower job growth than the 1.7 percent rate of job creation in the nation as a whole. Even more troubling, this represents a reversal from the previous year (March 2012 to March 2013), during which North Carolina outpaced the nation in job creation 1.6 percent to 1.5 percent.

Not only did North Carolina underperform the rest of the nation over the last year, the state’s performance in 2013 stacks up poorly compared to its performance in previous years. Over the past year (March 2013-2014), the state created 200 fewer jobs than it did over the same period the year before (March 2012-2013), and only created 100 more jobs than were created from March 2011-2012—hardly signs of an increasing job creation trajectory.

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Earlier this month, the Budget & Tax Center released a new indicator of how the state’s labor market is faring– and the results are troubling for the future of our state’s workforce.

The labor market currently has a large number of missing workers, according to an indicator developed by the nonprofit, non-partisan Economic Policy Institute and adapted here for North Carolina.  This indicator estimates the number of men and women who would have been working or seeking work if the Great Recession had never happened and job opportunities had remained strong over the last six years.

These missing workers are not reflected in the U.S. or North Carolina unemployment rate.BTC - Missing Workers March 2014

Nationally, the number of missing workers was 5,290,000 in March 2014.  If these missing workers were looking for work, the unemployment rate would be 9.8 percent rather than the official unemployment rate of 6.7 percent.

An even starker pattern emerges for North Carolina, there were an estimated 246,611 missing workers in our state in March 2014. If these missing workers were looking for work, the unemployment rate would be 11.6 percent rather than the official 6.3 percent for March.

An important reason why these workers remain missing from the labor market is the fundamental lack of available jobs.  The job growth that has occurred over the past year has not been sufficient the need for work among the state’s jobless workers and the result is too many workers missing from the labor market.

At his Tax Day press conference, Governor McCrory repeated the often-heard claim that the effect of cutting taxes on the state’s economy speaks for itself. Last year’s tax cuts may be speaking, but they’re not telling the story its proponents hoped—for the very good reason that tax cuts are just a poor strategy for promoting business growth and long-term job creation.

Here’s the Governor on Tuesday:

“Businesses are relocating to North Carolina because of the changes we made in our tax code and that speaks for itself.”

This claim does not bear up under serious scrutiny. In fact, decades of evidence support the opposite—taxes don’t drive business location decisions. Rather, the public investments that taxes make possible are the most important factors in determining where companies decide to locate—investments like an educated workforce, infrastructure, strong industry clusters, and proximity to research and development institutions.

So let’s examine the evidence Governor McCrory presented, starting with Lee Controls—a New Jersey-based company that recently relocated to Brunswick County and cited tax reform as one of the major reasons for their move. The company is promising to create just 77 jobs over several years. While creating even one new job moves the state in a positive direction, the fact remains that trying to dig North Carolina out of the job losses from the Great Recession is going to require more employment growth than can be generated by one 70-job project at a time.

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If you listened to Governor McCrory’s press event on Tuesday, you might be a little confused about the tax plan that pasted last year and what it means for our state.

Tax reform should be about modernizing the tax code in a way that ensures the system can continue to serve its fundamental purpose: providing enough revenue to support core public services. It should also be ensure greater revenue stability while not asking more from low- and middle income taxpayers as a share of their income than from wealthy taxpayers.  But all three of these principles of a sound tax system will be compromised under the tax plan passed last year.

Here are half dozen things that you should know that you didn’t hear at Governor McCrory’s press event: Read More

This tax season marks the final year North Carolina taxpayers will file their income taxes under the state’s old tax code. By next year the increased tax load for many North Carolina taxpayers will be apparent as a result of the tax plan passed by state leaders last year.

Today, the Budget & Tax Center released a report that highlights how the tax plan passed last year shifts the responsibility of paying for public investments to middle- and low- income taxpayers while providing generous tax cuts to the wealthy and profitable corporations. The report highlights various elements of the tax plan that fundamentally changes the state’s tax system and, subsequently, who pays taxes in North Carolina.

The tax plan passed last year replaces the existing graduated personal income tax rate structure with a flat tax rate that will largely benefit wealthy taxpayers who will now pay a much lower income tax rate. A number of tax provisions that benefit middle- and low-income families – such as the personal exemption and child and dependent care credit – are eliminated under the tax plan. Read More