Commentary, NC Budget and Tax Center

North Carolina not creating enough jobs to keep up with demands of working-age population

There’s more sobering news today on the state economy that conservative lawmakers are constantly (and, as it turns out, erroneously) touting as some kind of incredible success story. The bottom line: North Carolina continues to under-perform much of the rest of the nation in the post-Great Recession national recovery. This is new from the experts at the NC. Budget and Tax Center:

North Carolina’s economy is not creating the jobs needed to keep up with the demands of the working-age population in the state. The state unemployment rate dropped in February 2017 to 5.1 percent but remains above the national rate of 4.7 percent according to data released today by the Labor and Economic Analysis Division of the NC Department of Commerce.

Since February 2017, North Carolina’s unemployment rate has remained higher than the national average and that gap has grown slightly from a 0.3 percentage point difference to a 0.4 percentage point difference in February.

Even after years of a national recovery, job growth in North Carolina has not been sufficient to bring more people back to the labor market and provide jobs to those who are actively looking for work.

“North Carolina’s employment levels remain below pre-recession levels” said Alexandra Sirota, Director of the Budget & Tax Center, a project of the NC Justice Center. “As the labor force grows with an improving national economy, it is critical that the state’s job growth match the growth in the working-age population and the numbers still looking for work.”

The February labor market data underscore a number of important economic realities, including:

  • North Carolinians remain “missing” from the labor market: There are likely nearly 190,000 people in North Carolina that are not officially counted as unemployed but who would have been part of the labor force in earlier periods of economic growth.
  • Many North Carolinians still looking for work: There were approximately 252,500 North Carolinians looking for work in February, which is up approximately 30,000 since the Great Recession started.
  • Employment levels remain below historic levels: Job growth in North Carolina has not kept pace with the state’s growing population over the past several years. Approximately 59 percent of North Carolinians had a job in February, still well below what the state experienced in the 1990s and 2000s and below the immediate pre-recession level of 61.9 percent.


NC Budget and Tax Center, Trump Administration

Coverage losses, cost shifts to North Carolina could result from US House vote today on health care coverage

The U.S. House of Representatives is set to vote on the American Health Care Act today which seeks to strip the health care coverage extended to millions of Americans in recent years, shift the cost of health care onto middle and low income consumers and give the wealthiest taxpayers a tax cut.

It has been called by many the greatest redistribution upward in memory.

It is also a cost shift onto states.  North Carolina policymakers would have to find an estimated $6.6 billion over 10 years to maintain the Medicaid program alone.  To do so, state policymakers will have to raise taxes or cut services or cut off people from health care or cut payments to providers.  At a time when North Carolina’s leaders are contemplating their existing spending priorities with a tax code that continues to fall short of the needs, finding an additional $6.6 billion over ten years will be impossible without many of these steps.

The proposed restructuring of Medicaid represents unnecessary changes to a program that serves the state’s most vulnerable residents efficiently and with the goal of improving health outcomes of all North Carolinians.  This is a retreat by the federal government that will leave state policymakers responsible for the rationing of care and fallout from the health care industry.

Over time, as my colleague Luis Toledo detailed in recent analysis, these pressures on state government will grow.  The adjustment of the amount that the federal government will provide to North Carolina is not sufficient to keep up with the cost of services nor will it allow the state to contend with the next public health crisis or emerging treatments for existing diseases.

The loss of health care coverage through the dismantling of the Affordable Care Act and the restructuring of Medicaid will ripple through North Carolina, impacting families, health care providers and, yes, the economy.

NC Budget and Tax Center

Trump’s skinny budget would cut North Carolina’s medical research projects

As pointed out last week, President Trump’s proposed skinny budget shows a lack of vision as it makes no attempt to prioritize the allocation of money against various important American needs and priorities in a strategic manner. Since the skinny budget was released, there has been more analysis across the county as to how the proposed budget would impact each state. Today, we focus on analysis regarding the impact to health research in our state.

Recently, the Center for American Progress started a special series to assess State-by-State Cuts to NIH Funding in the Trump Budget. According to the analysis, if Trump’s proposed budget takes effect, there would be an 18.3 percent cut to North Carolina’s National Institutes of Health Funding.

The researchers point out that North Carolina was the 6th most highly funded stated in 2016. Last year, NIH made 2,221 grants to organizations in North Carolina, totaling $1.2 billion.
Regarding specific projects that could be threatened, they state:

“The Trump administration’s budget outline would cut NIH funding by $5.8 billion, an 18.3 percent drop. This proposal would have pared North Carolina’s NIH grant allotment to just $980 million if it had been applied this year.

This funding cut also threatens medical research projects in North Carolina scheduled to receive NIH support in future years. For example, Trump’s deep budget cuts could threaten projects including:

• Research being conducted at Duke University on combatting childhood obesity
• Duke University research into improving radiation therapy for cancer patients
• Efforts at the University of North Carolina at Chapel Hill, or UNC, to determine how to diagnose Alzheimer’s Disease at early ages to improve treatment
• UNC research on new treatments for the eradication of HIV

NC Budget and Tax Center

Four big problems with the NC Senate’s latest tax cut proposal

Senate leaders announced last week that they will file a “Billion Dollar Middle Class Tax Cut Act,” which is misnamed. It will actually continue to deliver the greatest tax breaks to wealthy taxpayers and profitable corporations and drive North Carolina ever closer to a zero income tax. The result will likely be a combination of underfunding needed public services in communities across the state and shifting the tax load to low- and middle-income taxpayers through increased sales and property taxes down the line. Here are four huge problems with the proposal:

1. Another $1 billion less in revenue makes it impossible to budget responsibly

The Senate proposes another $1 billion in tax cuts that will be paid for in cuts to public services. Importantly, the legislature’s Fiscal Research Division has already identified $680 million in immediate budget pressures—growing student enrollment in public schools and universities, health care costs, etc—for the next fiscal year. This does not include the well-documented need for the state to support rebuilding efforts in eastern North Carolina in the aftermath of Hurricane Matthew, nor the stated bipartisan priorities to invest in various unmet needs in the courts, mental health and other public service areas.

2. Eighty percent of the net tax cut since 2013 will have gone to the top 20 percent of taxpayers.

The cumulative change in taxes for North Carolina taxpayers will mean that the majority of the net tax cut since 2013, a full 80 percent, goes to the top 20 percent of taxpayers. If this proposal moves forward, a millionaire in North Carolina will have received an average annual tax cut of $20,000, while only a third of taxpayers who earn less than $20,000 would get anything. Taking all tax changes since 2013 into account, people who earn less than $20,000 would receive an average tax cut of $15 under this proposal.

3. Two-thirds of taxpayers in the bottom 20 percent of taxpayers receive no tax cut.

Senate leaders released misleading figures that seem to imply that some of the state’s counties with the highest poverty rates would see the largest tax cuts, but that’s simply not true. The major tax policies proposed in the Senate plan do not target low-income households or communities. These policies seek to exempt more income from taxation, lower the rate on income that is taxed, and uncap itemized deductions claimed by a very few and wealthy taxpayers. Most importantly, these income tax policies do not address the reality that many low-income taxpayers contribute through sales tax and do not have sufficient income to benefit from increasing the standard deduction or a Child Tax Credit that is not refundable. Fully two-thirds of the taxpayers with income below $20,000 a year will receive no tax cut from the Senate’s proposal.

4. Rural communities will continue to be hurt by the Senate tax cut proposal.

Not only will rural communities continue to be among the hardest hit from the loss of state revenue (many infrastructure, economic development and educational investments made by the state are not possible under current austerity policymaking), most rural North Carolinians would see little to no change in their tax payments. Tax returns reporting adjusted gross income over $100,000 and who are likely therefore to be among those receiving the vast majority of the benefits from the tax changes since 2013 are more concentrated in urban areas according to Internal Revenue Service data. Nearly half of taxpayers in rural counties have income that is too low to see any benefit from the Senate tax plan.

Check back here later for our full analysis of the Senate tax proposal.

NC Budget and Tax Center, Trump Administration

Trump’s budget will not make America great again

Budgets matter, both within government and inside each household across America. Within government, a budget in its most basic form equals policy priority. Yesterday, the White House released its first budget blueprint, also referred to as its skinny budget, and the consensus all around is that the proposed budget will not make America great again.

Instead, Trump’s proposed budget will hurt households and remove the foundational role of many federal programs that support the economy and neighborhood well-being.

The reason Trump’s budget will not make America great again is simple: Trump’s budget makes no attempt to prioritize the allocation of money against various important American needs and priorities in a strategic manner. Instead, the Trump budget blueprint makes it very clear that in order to make America great again it only has to address one policy goal: safety. The budget proposes a $54 billion increase in spending on defense.

The safety and security of America is vital. However, the recipe of what has truly made America great over time has been its ability to prioritize effectively various policies, including security, in order to serve all Americans and provide for a more prosperous future that considers a wide array of current and emerging issues. Eroding support to state and local governments, reducing investments in neighborhood well-being and limiting the economic security of Americans will undercut that goal. Read more