NC Budget and Tax Center

Latest revenue forecast shows state’s economy only in line with national recovery

Even though North Carolina has collected more money than initially projected this quarter due to a moderate but steady ongoing economic recovery, it’s still far too little to pay for the investments our state needs to thrive. Tax cuts for the wealthy and powerful have reduced the money that would have otherwise been available to North Carolina to invest in our communities.

For the first quarter of the current fiscal year (July through September), General Fund revenue was $158 million, or about 3 percent, above the cautious target set by state officials. This does not suggest that all is well here in North Carolina, which becomes evident when assessing the health of state investments in local communities across the state. There is still far too little commitment to building thriving communities through investments in the classroom, community economic development, infrastructure, public health and environmental protection.

Beyond the $158 million figure, the latest quarterly revenue report released by the NCGA Fiscal Research Division highlights additional noteworthy points regarding the state’s economic and revenue landscape.

  • The early months of the fiscal year are typically the least important months as an indicator of revenue outcomes for the full fiscal year. Revenue performance during the second half of the fiscal year provides a better sense of overall revenue performance.
  • The national economy hasn’t been able to accelerate into overdrive and continues to move at a steady, moderate pace. North Carolina has yet to experience a robust expansion as a result. The revenue report also highlights that the improving economy has been insufficient to produce robust employment and consumer markets.
  • State officials see no sign of acceleration on the horizon.

The report also notes that state officials were necessarily cautious with their forecast and expect moderate, steady economic performance for the remainder of the fiscal year. In the wake of tax cuts passed by state lawmakers in recent years that largely benefit the well-off and that will reduce annual revenue by more than $2 billion once fully in place, the report supports two particular realities.

  • The costly tax cuts have not spurred economic growth and the creation of new jobs. The revenue outlook report notes that North Carolina economy mimics that nation’s steady, moderate recovery. The tax cuts have reduced resources available to invest in public schools, health services for seniors and the poor, and ensure that communities across the state can thrive.
  • For the most recent fiscal year, sales tax revenue collections were $190.4 million below expected collections. Since 2013, tax changes have resulted in a steady increase in reliance on sales tax and away from income taxes. Expanding the sales tax base with newly taxed services makes projecting revenue collection difficult. Furthermore, a greater reliance on the sales tax disproportionately impacts low-income taxpayers who spend a larger share of their income on state and local taxes compared to the state’s highest income earners who have benefited the most from income tax cuts in recent years. This tax shift also could create a tax code that does not adequately fund the investments that help build thriving communities.
NC Budget and Tax Center

Deadlines approach on some federal assistance programs for those affected by Hurricane Matthew

While we continue to learn about the many ways that Hurricane Matthew has delivered destruction and hardship to our communities, we know that there will be the need for many months and even years of rebuilding.  The North Carolina Justice Center stands at the ready to promote the best policies to support an equitable and inclusive recovery that builds thriving and resilient communities.

Right now, there are deadlines approaching to apply for critical federal assistance that we want to make sure Pulse readers have and share with their families, friends and neighbors in Eastern North Carolina.

  1. Food assistance is available to residents who have NOT been receiving food assistance but who need help accessing food in the following counties: Beaufort, Bladen, Columbus, Cumberland, Dare, Duplin, Greene, Harnett, Hoke, Hyde, Johnston, Jones, Lenoir, Pender, Robeson, Sampson, Tyrrell, and Wayne. More information can be found here.  The deadline is Wednesday, October 26th.
  2. Disaster unemployment insurance is available for residents in the following counties: Beaufort County, Bertie County, Bladen County, Columbus County, Cumberland County, Dare County, Edgecombe County, Greene County, Harnett County, Hoke County, Hyde County, Johnston County, Jones County, Lenoir County, Nash County, Pitt County, Robeson County, Sampson County, Wayne County, and Wilson County. Individuals affected by the disaster and are unable to continue working can apply for disaster unemployment insurance.  Be sure to apply by November 14, 2016.  You can call 1-866-795-8877  and visit: to apply online.
  3. General disaster assistance for housing, home repairs and other damage is available. Individuals—homeowners and renters— and business owners who sustained losses in the designated area can begin applying for assistance tomorrow by registering online at or by calling 1-800-621-FEMA (3362).  It is recommended that you should apply even if you have insurance. Disaster assistance applicants, who have a speech disability or hearing loss and use TTY, should call 1-800-462-7585 directly; for those who use 711 or Video Relay Service (VRS), call 1-800-621-3362. The toll-free telephone numbers will operate from 7 a.m. to 10 p.m. (local time) seven days a week until further notice.

For more information regarding local services and resources, you can also dial 211 or visit


NC Budget and Tax Center

For many low-income North Carolinians, Matthew’s damage is deeper than broken buildings

As the state begins recovery efforts following Hurricane Matthew, we begin to see unexpected damages. These damages are beyond the ruin of physical structures. These damages are not the effects of harsh winds and high waters. Instead, they are the years old damages – the damages of persistent poverty, underinvestment, and systemic neglect.

But what does poverty have to do with recovery from Matthew? While the hurricane itself did not distinguish between the rich and the poor, the ability of communities and families to recover will depend largely upon just that.

A recent N.C. Budget and Tax Center report (“North Carolina’s Greatest Challenge—Elevated Poverty Hampers Economic Opportunity for All”) finds that 1.6 million North Carolinians live in poverty – that’s a poverty rate 15 percent higher than before the Great Recession. North Carolina has the 12th highest poverty rate, child poverty rate, and deep poverty rate in the nation, and people of color, women and children are more likely to be in poverty than their white, male counterparts. Additionally, the report found that in North Carolina in 2014, the 20 counties with the highest rates of poverty were all rural. North Carolina had a serious issue with poverty even before Matthew hit.

In “Poor, Displaced and Anxious in North Carolina as Floods Climb After Hurricane,” New York Times reporter Jess Bidgood highlights the disproportionate impact the hurricane had on our poorest communities. The story notes that families with vehicles, or who could afford moving trucks, were able to evacuate their families and valuables. Additionally, workers with paid time off or savings are able to absorb the financial burden that comes with evacuation and recovery. Families in poverty and without savings or paid leave policies were more likely to lose valuables and essentials and have fewer means to replace them. Families living paycheck to paycheck can barely afford a day off, let alone weeks out of work. Even FEMA admits it will only be able to provide very modest short term support for even the neediest families.

This is from the story:

“But even when state and federal officials work to disburse flood aid, experts said, it is often harder for families living on the margins to bounce back. The Food Bank of Central and Eastern North Carolina estimated that 356,000 people in the 21 counties it was monitoring for storm and flood effects did not have access to enough healthy food, even before the floods.”

In “Flooding from hurricane hits lower-income North Carolina residents hard,” Washington Post reporters Chico Harlan and Angela Fritz drew attention to some of the pre-existing inequalities that will impact recovery. Read more

Commentary, NC Budget and Tax Center

Why mass deportation would cause a $10.6 billion loss for NC industries (graph)

In case you missed it, the Budget and Tax Center is out with a powerful new installment in its Prosperity Watch series — this one on the massive beneficial impact of immigrants to the North Carolina economy and what it would mean if we embarked upon the kind of mass deportation policies advanced by some political candidates. This is from the “Mass deportation would mean $10.6 billion loss for NC industries”:

Immigrants are an important element—as workers, consumers, and business entrepreneurs—in building a thriving state economy.  Current rhetoric on mass deportation as a policy to address our broken immigration system overlooks immigrants’ contributions to state and local economies, and, additionally, the impact that an absence of workers would have on major industries.

A new report measuring the economic consequences of a mass deportation policy reveals a $236 billion reduction in total GDP and a cost of nearly $900 billion in lost revenue over 10 years for the federal government. Nationally, the industries that would be hit the hardest by the absence of an undocumented immigrant workforce would be agriculture, construction and leisure and hospitality. Estimates indicate that these industries would experience a workforce reduction of 10 to 18 percent or more.

For North Carolina, such a policy would result in a more than $10.6 billion loss for local industries. Manufacturing would experience the largest cut with a loss of approximately $2.4 billion in annual GDP. Construction ($2 billion) and Leisure and Hospitality ($1.3 billion) would experience the second and third highest losses in annual GDP if mass deportation were to occur. Our state simply cannot afford such a hit to industries still recovering from the effects of the recession.


These estimates do not account for additional setbacks in the form of reduced state and local tax revenue. Removing undocumented immigrant taxpayers would prevent our state from investing in education and work opportunities.

Instead, policymakers should seize the opportunity of growing our economy by lowering the barriers to immigrants’ full economic participation. This can be done through different policy choices, such as action in Congress that would enable a legalization program and eventual pathway to citizenship for the 338,000 undocumented immigrants currently living in NC. States can also improve economic opportunities for immigrants by promoting proven integration policies for immigrant families including: in-state tuition, access to professional licensing/credentialing, English language training, and transportation and access to jobs.

NC Budget and Tax Center

Logic Fail: Conservative NC group peddles misleading paper on tax cuts

Did you know that drinking lemonade can give you sunburn?

If you haven’t, don’t worry, it’s not true. However, a paper just released by the Civitas Institute traffics in just these kinds of erroneous connections. The study claims that recent tax cuts in North Carolina have led to thousands of new jobs, but the analysis simply doesn’t stand the weight of scientific scrutiny.

The study unabashedly ignores any published research that does not fit its worldview. Whole forests have been sacrificed to print papers on the relationship between taxes and economic performance, many finding little or no relationship whatsoever. The relationship between taxes and growth is complex, contextual, and evolving, so there is ample evidence that simply cutting taxes does not lead to stronger growth. Sadly, the Civitas Paper simply sails past any and all confounding evidence en route to their pre-chosen destination.

In so doing, the Civitas-hired researchers commit a cardinal analytical blunder called “omitted variable bias”, something covered in most introductory statistics classes. That may sound like a complicated term, but it’s actually perfectly intuitive, which brings us back to lemonade and sunburns. Just looking at data on lemonade and sunburns could lead one to conclude that drinking the stuff is associated with elevated risk of developing dry, reddened, and painful areas on the skin. Of course, it’s really the sun that causes both sunburn and a thirst that only lemonade will quench, but you wouldn’t know that if you didn’t include data on how sunny it was.

Unfortunately, the heart of the Civitas study is rooted in precisely this kind of logical fallacy. The report acknowledges that many policy and economic factors are strongly related with each other, but rather than dealing with the complexity of the real world, the study chooses instead to separate each policy into its own statistical model. As a result, the analysis cannot discern what is actually causing the economy to grow faster or slower. However, the write-up of the findings acknowledges none of these shortcomings or the other methodological problems, and its policy prescription is equivalent to imploring dermatologists to direct their patients to steer clear of lemon-infused sugar water if they want to avoid sunburn. Read more