Commentary, NC Budget and Tax Center

Unbalanced 2016 did little to even the economic score

You’re not imagining it, 2016 was an unbalanced economic year. The national economy had one of its best years in the last decade, and some parts of North Carolina significantly outpaced the nation, but many communities were left further behind. 

(To view charts that summarize last year’s economic record, and to make commitments for the current trip around the sun, visit our 2017 Resolution page.)


Over half of North Carolina’s counties have not recovered to pre-recession employment levels.
While many parts of the state have finally surpassed pre-recession employment levels, 52 of North Carolina’s counties still have fewer jobs than before the Great Recession took hold. Nine North Carolina counties actually lost jobs during from November 2015 through last month, a particular worry given that 2016 saw decent growth nationwide. Read more

NC Budget and Tax Center

North Carolina’s high levels of income inequality no accident

North Carolina is among the states with the highest income inequality in the country, according to a new report from the Center on Budget and Policy Priorities. North Carolina ranks 14th in the country, with its richest residents— the top 5 percent of households— having average incomes 14.71 times as large as the bottom 20 percent of households.

These findings come after North Carolina policymakers gathered last week to address the damage of the Hurricane Matthew and ignored calls to fix North Carolina’s upside down tax code by enacting a surcharge on taxable income over $200,000 and keeping the corporate income tax rate at the already-too-low 4 percent.

As the researchers find, this kind of failure to enact progressive tax policy not only loses the state much needed revenue now and in the long-term, it can also make inequality worse.

The report offers recommendations about how state tax policies can be used to begin to reduce inequality.

  • Retain or expand taxes on inherited wealth, such as the estate tax.
  • Eliminate costly and ineff­ective tax breaks for corporations
  • Enact or expand earned income tax credits, which boost incomes among low-and moderate-wage working families.
  • Maintain an overall tax system that raises sufficient revenue to pay for the building blocks of shared prosperity.

For North Carolina, these recommendations signal we have made the wrong choices in recent years to ensure the economy works for everyone.  Instead, our policymakers have made the tax code work for the state’s wealthiest and powerful.

In the year ahead, let’s hope our legislative leaders begin to recognize that working North Carolinians and those struggling in today’s economy deserve a tax code that doesn’t create more barriers to their well-being.

NC Budget and Tax Center

Raleigh lawmakers aren’t really tapping Rainy Day Fund for hurricane aid

For years we have watched as policymakers set aside funding for a Rainy Day despite pressing needs in communities.  We were told this conservative approach to budgeting would be important in times of crisis—natural or economic disasters—that put pressure on the state to make immediate investments when their ability to adjust the revenue side may feel more limited.

Hurricane Matthew represented an important test of this approach.  And in their response, while emphasizing important immediate spending needs to stabilize communities in Eastern North Carolina, policymakers in Raleigh have demonstrated that they aren’t really willing to tap into that savings account.

Instead, they have written into the hurricane bill language that the Governor’s next budget proposal must recommend taking $100 million to repay the Rainy Day Fund before meeting existing needs.  It may not mean an explicit cut, given revenues are improving with an improving economy, but it will mean we will start off with less to maintain current service levels in the next fiscal year.  Certainly, North Carolina will be hampered once again in our efforts to address the range of unmet needs in the classroom, in communities and for employers if we cannot draw the funds that we have saved to make sure that doesn’t happen.

What will it take for legislative leaders to tap the Rainy Day Fund without restrictions if not to help communities devastated by natural disasters?  If not now, then when?

NC Budget and Tax Center, News

NCGA Special Session Day 1: Disaster relief, no big surprises (yet)

The first day of the North Carolina General Assembly’s special legislative session is in the books – and the biggest surprise may have been no big surprises.

Yet.

Crowds gathered to protest a rumored court packing scheme that was first floated among conservative policy groups and media back in November and has remained popular in some conservative circles up until this week. The N.C. GOP none-the-less blasted Democrats and the media for the rumors as Republican legislative leaders finally and unequivocally said Tuesday that it was a bad idea and they had no plans to carry it out. They had, up until this week, refused to rule it out and said they hadn’t heard any discussions about it.

The N.C. House unanimously passed its version of the disaster relief bill for which the special session was originally conceived. Some critics said the final version of the bill as not enough and pointed out that it does not have a schedule for disbursement of funds . The N.C. Justice Center’s Budget & Tax analysts pointed to a provision that requires the governor to borrow against next year’s budget to pay for the aid package. House Republicans said another aid bill would be coming in the spring’s long session.

There was some argument on the House floor over the number of school days lost to the disasters addressed in the bill would have to be made up. The final bill requires only two days be made up, the rest forgiven.

That bill now goes to the N.C. Senate, which has until noon Wednesday to file its own bills for the session. Those looking for surprises this session may find them there.

Just five other bills were filed in the House, which had a filing deadline of 5 p.m. Tuesday. Two were housekeeping items – passage of the rules and the method for adjourning the session.

N.C. Rep. Larry Hall (D-Durham), the outgoing minority leader – filed a bill to restore early voting and a bill to establish non-partisan redistricting, both unpopular ideas with the Republican super-majority in the legislature.

The N.C. Senate reconvenes at 8 a.m. Wednesday. The house reconvenes at 11 a.m., though House Speaker Tim Moore said there will be no votes there until 1 p.m.

NC Budget and Tax Center

Disaster recovery bill a good start, but a sustained commitment is needed

State lawmakers have proposed providing $200.9 million in one-time state funds to assist with recovery and relief efforts resulting from Hurricane Matthew, wildfires in the Western part of the state, and Tropical Storms Julia and Hermine. A little over half of the relief aid comes from drawing down the state’s Savings Reserve Account, which has a current balance of nearly $1.6 billion. The other half of relief aid is unappropriated funds in the state budget for the current fiscal year.

The disaster recovery funds are allocated to eight different entities and the proposed bill specifies the intended use of funds, such as providing state matching funds for federal disaster assistance program, helping meet short-term housing needs of affected individuals, assisting affected counties with resilient redevelopment planning, grant and loan programs for affected businesses, and grants to local governments for infrastructure construction, among other permitted use of funds.

The proposed legislation represents a promising start in that it provides needed resources to assist in rebuilding more resilient communities—and is explicit in that goal for long-term transformation of the region. However, approximately 88,000 homes were damaged with a total loss of more than $967 million. That is far great than the impact of Hurricane Floyd in 1999 when a total of 56,000 homes were damaged. Moreover, entire towns were flooded to the rooftops. More than 8,000 businesses have requested assistance due to physical or economic impact loss. Wildfires in western NC have resulted in more than 62,000 total acres burned.

The scale of the damage is large and will require a sustained commitment at the state level beyond providing one-time disaster recovery funds. This will require lawmakers to ensure that adequate state resources are available for subsequent disaster recovery assistance and not at the expense of foregoing public investments in our public schools, healthcare services for the elderly and poor, access to an affordable college education. However, the disaster recovery bill could potentially mean borrowing against next year’s budget because it requires the Governor to recommend replacing the $100.9 million in Rainy Day Fund dollars committed in the current relief aid bill in his 2017-18 budget. Requiring cuts to next year’s budget to pay for hurricane assistance today would only hurt the kind of ongoing investments needed to help these communities rebuild and thrive.

Lawmakers can ensure adequate revenue is available for relief aid and public investments by stopping yet another corporate income tax cut. Halting this tax cut would create $349 million in revenue to make that commitment this year, which would help ensure all North Carolina communities can thrive.