NC Budget and Tax Center

U.S. House farm bill spells disaster for millions of North Carolinians

Last week, the House Agricultural Committee released its version of the 2018 farm bill. Chairman Conaway’s proposal would increase hunger and further burden struggling North Carolinians by cutting, and in many cases taking away, food assistance. Its effects will ripple through communities, businesses, and farms across generations.

Rather than helping those in need by providing job training opportunities or ensuring workers earn a living wage, this proposal seeks to take away their food. The effects of these harsh changes will be felt by everyone, including parents raising children, people with disabilities, older workers, low-wage workers, and those unable to find jobs.

  • Given that North Carolina is the 10th hungriest state in the nation, this bill would be particularly devastating for our residents. In 2016, SNAP reached more than 1.5 million North Carolinians, targeting the most vulnerable folks to help ensure older adults, veterans, and children get enough to eat each day. SNAP benefits also help stimulate the state’s economy. More than 9,700 grocers and retailers participate in the program, which pumped $2.2 billion into the economy last year. On average, from 2011 to 2014, SNAP benefits lifted 175,000 North Carolinians – including 81,000 children – out of poverty. Click here to learn more about who’s hungry in your legislative district.
  • This bill strips flexibility from the state and creates barriers to the efficient delivery of services. By restricting categorical eligibility and imposing an untested child support cooperation mandate, this proposal prevents North Carolina from administering SNAP in a way that is most efficient and follows the evidence. Categorical eligibility (CAT EL) is critical in providing food assistance to low-income families with children. Data from the Department of Health and Human Services find that eliminating CAT EL would strip food assistance from 133,000 North Carolinians, including more than 51,000 children.
  • Countless individuals would be at risk of losing food assistance through no fault of their own. There are more jobless workers than there are job opportunities in 87 of North Carolina’s 100 counties. The notion that harsh work requirements would “motivate” jobless workers to find work ignores this fundamental reality. Although North Carolina banned work-requirement waivers for economically depressed counties in 2016, these work requirement provisions would double down on people already struggling to find work and preclude the state from undoing a harmful state law that ignores economic realities. Significantly, it would extend the reach of work requirements to affect parents of children over the age of six and older adults.
  • Funding for new work programs is inadequate and fails to recognize what is needed to get people back to work. Under this proposal, North Carolina will be required to provide employment assistance to every eligible SNAP recipient. While not a bad idea on its own, the proposal only allocates $1 billion for an estimated 3 million participants throughout the nation, amounting to $30 per month per participant.This unfunded mandate at the federal level will be pushed down to North Carolina legislators and leaders to address with resources that have artificially been constrained by tax cuts. Currently, only nine of 100 counties in the state operate SNAP Employment and Training programs. In order to offer meaningful employment and work support, North Carolina would have to invest in a workforce development system that reaches rural communities and provides short-credentials, apprenticeships, subsidized work or on-the-job training. In addition, given the evidence around wrap-around services contribution to supporting employment outcomes, North Carolina would need to make additional commitments to transportation, child care, and affordable housing, among other programs.
Commentary, NC Budget and Tax Center

This simple graph sums up NC’s “tax the poor, feed the rich” tax system

In case you missed it on Monday, the latest edition of Prosperity Watch from the N.C. Budget and Tax Center neatly sums up one the most pernicious aspects of North Carolina’s tax system: its favoritism for the rich.

Tax season comes to a close this week, and Tax Day serves as a good time to reflect on who pays taxes in North Carolina. The income tax is, naturally, at the foremost of our minds, but often ignored as one of the best tools to align our tax code with taxpayers’ ability to contribute to and help build thriving communities.

North Carolina’s adoption of a flat income tax rate – after years of having a graduated income tax rate – has made our tax code more upside down, asking less of those with the highest income. A graduated income tax applies a higher rate on every dollar of income above certain thresholds, while a flat rate delivers a bigger tax cut to the state’s wealthiest taxpayers.

The reduction in the share of their income paid in state and local taxes—through this change as well as others since 2013—means fewer dollars for investments in the pathways that connect people to opportunity such as quality early childhood, K-12 education, and affordable post-secondary education. It also means that middle- and low-income taxpayers continue to pay nearly 10 percent of their income annually in state and local taxes, nearly two times as what is paid by the top 1 percent with average income is $1 million.

This upside down approach to raising the revenue needed for public schools, health, and well-being is also unlikely to perform over time. Without a tax code that aligns with where income growth is happening – concentrated at the top – over time the dollars available for public investments will fall short of what is needed.

 

NC Budget and Tax Center

Reckless tax cuts stop NC from funding regional support for DSS offices

Do you remember Rylan’s LawThe Family/Child Protection & Accountability Act? Last year, state legislators sought to change how the state administers and delivers social services programs, including child welfare services, food assistance, Medicare, Medicaid, and others.  The effort began with a focus primarily on the child welfare system after federal oversight identified many challenges as caseloads climbed and funding fell short.

The Social Services Regional Supervision and Collaboration Working Group has been working to put together a detailed plan on how the regionalization of DSS offices should be implemented, including maps and staffing structures. The proposal focuses on providing regional support—training, coordination– to DSS offices and maintaining the physical presence of offices in communities.

On Tuesday last week, the working group presented the first of two final reports to the Joint Legislative Oversight Committee.

Although support for the proposed plan was strong, there was a common point of contention: there was no plan for how any of the changes would be paid for. Instead, the co-chair said the group would have to take a “wait and see” approach regarding whether they would consider costs as a part of the plan.

Since 2013, the state has lost billions of dollars in revenue due to tax cuts that primarily benefited high-income North Carolinians and corporations.  Those tax cuts will continue next year when additional tax cuts for corporations and individuals will lose $900 million over the next fiscal year.

Prioritizing children’s well-being and families’ economic security means funding those priorities not more tax cuts.

Our state’s reckless commitment to tax cuts has very real consequences when it comes to making the critical investments we all know we need. It means that even when policy makers are able to agree on what we should be doing, we are unable to do so.

Brian Kennedy II is a Public Policy Fellow for the Budget & Tax Center, a project of the North Carolina Justice Center.

Commentary, NC Budget and Tax Center

Fiscal policy expert: So you love North Carolina, huh? Well then fund it, doggone it

North Carolina Budget and Tax Center director Alexandra Sirota is out with a new BTC Brief that ought to be a “must read” for all state lawmakers as they prepare for the 2018 legislative session that commences next month. In “Love NC? Fund NC.” Sirota explains why it is essential for lawmakers to revisit their plan to inflict a new round of destructive tax cuts on the state in 2019. This from the introduction:

“As the General Assembly returns for a short legislative session, their primary focus should be addressing the impending cuts to corporate and personal income tax rates in January 2019. After successive rate reductions on the income tax side since 2013 — which primarily benefited wealthy taxpayers and large, profitable corporations — the state of North Carolina is poised to continue to reduce its investments in people and places and leave needs unmet again this year.

Scheduled rate reductions for January 2019 will put the state’s budgets out of balance in future years, requiring cuts to investments in public health, environmental protections and education, failing to keep higher education affordable and K-12 classrooms and schools funded to serve each child. North Carolina will lose roughly $900 million over a year in revenue from the reduction of the corporate income tax rate to 2.5 percent from 3 percent and from the flat personal income tax rate falling to 5.25 from 5.499 percent.

At this point in the state’s failed tax-cut experiment, it is time to return to an approach that prioritizes investments in people and places over tax cuts for corporations and the wealthy. Evidence shows it will not only strengthen the connection to prosperity for more people and places but will also grow the economy in more inclusive and sustainable ways. It will also ensure that the state is pursuing a fiscally responsible path in light of its long-term needs and the uncertainty of federal fiscal policy.

Removing the scheduled tax cuts from statute this session is the first step to ensure that North Carolina can adequately invest in its future, strengthen the economy for the long-term and prepare for likely external shocks to the state’s economic and fiscal health.”

Click here to read this rest of this very important report.

Commentary, NC Budget and Tax Center

This is what much of the growing national education uprising is all about

In case you missed it earlier this week, Alexandra Sirota of the N.C. Budget and Tax Center authored an excellent “Prosperity Watch” post about the direct relationship between the ongoing conservative tax cut binge and the precipitous fall in public education investments in state’s like North Carolina. Be sure to click on the “Read More” button to see a graph that shows just how poorly North Carolina is faring.

Tax cuts make the country’s classroom challenge worse

Children’s educational success across the country is being undermined by budget cuts that – in most states – have led to reductions in investments in each child, cuts to teacher pay and benefits, and under-funding of the tools that promote reading proficiency and high school completion.

In its annual review of state investments released last fall, the Center on Budget & Policy Priorities ranked North Carolina among the 29 states that are still spending below pre-Recession levels for the education of each child in K-12.  North Carolina still remains seven percent below per-pupil spending levels when compared to when the recovery began in 2009.

Teachers, school personnel and parents in West Virginia, Kentucky, Oklahoma and Arizona  are objecting to these artificial constraints with demonstrations of just how foundational public education is to the community.  Cuts and underinvestment in children’s education is made worse in states where policymakers have also cut taxes.  For example, corporate tax rates in Arizona were cut by 30 percent in 2006, while personal income tax rates were cut by 10 percent just five years later.  In Oklahoma, the personal income tax rate cuts began in 2004, which were followed by cuts to the severance tax on oil and gas, the exemption of capital gains income from taxation, and elimination of the estate tax.

In North Carolina, corporate income tax rates have been cut by 56 percent since 2013, and the state’s graduated rate on personal income tax that began at 6.25 percent has been reduced to a flat rate of 5.499 percent.  Both corporate and personal income tax rates are scheduled to be cut again in January 2019.

New data released by the Education Law Center demonstrates how holding down investments in public schools could be addressed if state leaders chose to align their tax code with their economic capacity.  Read more