immigration, NC Budget and Tax Center

Report: Immigration enforcement by local governments in NC is costing taxpayers millions

North Carolina taxpayers are bearing the cost of federal immigration enforcement by local governments. A recent report estimates the statewide financial cost of honoring immigration detainers and holding immigrants in local jails is $7.4 million annually, resulting in a cumulative cost of roughly $80 million over the past decade.

These direct financial costs would continue and could increase as a result of House bill 370, which would require local law enforcement to collaborate with Immigration and Customs Enforcement (ICE) or face financial penalties of up to $25,5000 a day. The bill does not provide for any financial resources to cover the costs that local governments would incur, meaning that dollars would have to be taken from elsewhere or taxes would need to be raised.

ICE does not compensate local agencies for the additional costs associated in cooperating with immigration agents. This leaves local jurisdictions to cover the expenses of trainings required to participate in programs, personnel salaries, and transportation costs.

Across the country, states have documented the costs of such an unfunded shift in responsibility to local governments for enforcing federal immigration law. In Texas, the state’s corrections department reported ICE detainers cost local jails roughly $71 million statewide in 2017. Recent reports suggest ICE detainers have an average annual cost of $9 million in Georgia and $13 million in Colorado.

Partnering with ICE also has a track record of hurting community relations. As described in the report, the social costs of cooperating with immigration agents translates into community members mistrusting law enforcement and public institutions. It also has significant impacts on community cohesion, civic engagement, and the overall well-being of immigrants and citizens alike.

HB 370 has now been sent to the North Carolina Senate and it sits in the Rules Committee, where it could move at any time. For the stability of communities, safe delivery of policing services and overall community success, senators would do well to leave the proposal in committee for the rest of the 2019 session.

Lissette Guerrero is an intern with the Budget & Tax Center and Immigrant & Refugee Rights projects of the NC Justice Center.

NC Budget and Tax Center

Legislatures across the country see EITC expansion legislation

The New Mexico legislative session came to a close last week with a tax policy bill that included an expansion of the New Mexico state version of the Earned Income Tax Credit from 10 percent to 17 percent of the federal credit.

The Earned Income Tax Credit (EITC) is considered an especially effective policy mechanism for driving down poverty. As a result, a number of state legislatures have seen bills during the 2018 and 2019 legislative sessions that have sought to increase the percentage value of their complementary state credit.

The Michigan legislature is considering two such bills. HB 4298 seeks to increase the Michigan state EITC from 6 percent to 20 percent of the federal credit. HB4324 would seeks to increase that percentage to 30 percent of the federal credit.

A bill recently introduced in the Delaware legislature is a hybrid of refundable and nonrefundable EITC. The bill is designed to give recipients a choice between a fully refundable credit at 4.5 percent of the federal credit, or a nonrefundable 20 percent credit.

Ohio Governor Mike DeWine signed legislation to increase the state EITC from 10 percent to 30 percent of the federal credit.

2018 was marked with EITC expansion in six states. California, and Maryland sought to expand their state EITCs through increased accessibility across populations. Maryland now has no minimum age requirement for EITC filers. Single California filers age 18-24 without dependent children, along with single filers older than 65 without dependent children are now eligible to claim the California credit.

Massachusetts expanded its state credit from 23 percent to 30 percent of the federal credit, while Vermont and New Jersey saw similar increases from 32 percent to 36 percent and 35 percent to 40 percent respectively. Meanwhile, Louisiana expanded its EITC from 3.5 percent 5 percent of the federal credit.

NC Budget and Tax Center

Proposed tax cut bill in Congress would help 3.7 million in N.C.

A majority of the families that benefit from the Earned Income Tax Credit (EITC) are single head of household filers— a filing designation commonly used by single mothers. The same single mothers who are struggling to provide the basics of a healthy and happy life for their children in an economic climate defined by stagnating wages and higher costs for childcare, medicine, and housing. North Carolina’s low- and middle-income working families are struggling to stay afloat as costs rise faster than their pay.

In North Carolina, these same families are responsible for an ever increasing tax burden while our state’s wealthiest individuals and corporations are not being asked to pay their share.

In stark contrast to the Tax Cuts and Jobs Act (TCJA) of 2017 that was heavily tilted in favor of corporations and the wealthy, several Senate co-sponsors just introduced the Working Families Tax Relief Act.

If successful, the Working Families Tax Relief Act will strengthen the highly effective EITC and Child Tax Credit (CTC).    Read more

NC Budget and Tax Center

Trump tax policy helped many of the biggest corporations completely avoid taxes in 2018

With last years’ tax returns now in, it is all the more evident how massive a gift the Trump Administration and Republicans in Congress gave corporate America in their 2017 package of tax cuts. Many of America’s wealthiest corporations received a huge windfall in 2018, even as most Americans face the prospect of declining public services and deepening public debt.

A recent report shows that 60 of the largest corporations managed to pay no corporate income taxes in 2018, and many of these companies actually received substantial tax rebates. A few notable examples of corporations who made off particularly well under the Trump tax cuts include:

  • Amazon: Had $11 billion in revenues from business in the United States and received $129 million in tax rebates.
  • Netflix: Paid no corporate taxes on over $850 million in U.S. income.
  • Chevron: Revenues from U.S. operations of approximately $4.5 billion and received $181 million in federal tax rebates.
  • Halliburton: Took in over $1 billion in U.S. revenues, and received a $19 million tax rebate

These companies managed to avoid taxation by exploiting a range of loopholes in the federal tax code that were either left untouched or actually expanded by the 2017 tax bill.

Capital-intensive companies like Chevron and Delta Airlines were able to slash their taxes using Accelerated Depreciation, a provision well known in corporate accounting circles but not widely understood beyond those circles, that allows companies to claim larger tax write-offs for the decreasing value of expensive equipment.

Amazon and Netflix were leaders in using stock option payments to their corporate executives to avoid millions in corporate taxes. Even though granting stock options does not directly hit companies’ revenues like salaries would, corporations can still claim the value of the options as an expense and thereby reduce their tax bill. Moreover, these options also allow wealthy executives to avoid paying the personal income tax rate on that income, instead paying the lower rate applied to capital gains.

A range of other companies were able to zero out their taxes in 2018 using tax credits for energy production, research and development, and other special treatment still littered throughout the federal tax code.

Instead of draining the swamp, the 2017 tax cuts only gave smart corporate attorneys more bog to explore. The result was predictable: Most working families and small businesses got peanuts (or saw their taxes go up) while many of the biggest corporations in the country avoided paying taxes altogether. Sooner or later we have get serious about getting large and profitable companies to pay their share, or we will all end up paying the bill for tax breaks that mostly benefit the most fortunate.

NC Budget and Tax Center

Millionaire’s tax could raise revenue, spur growth, and advance race equity

Tax week represents a good time to reflect on how North Carolina’s current tax code places limitations on revenue building opportunities for much needed public investments. If North Carolina seeks to fulfill its commitments and ensure prosperity for all of its residents, then it must take advantage of sound policies — like placing high rates on higher incomes through a a millionaire’s tax — that can raise such revenue. Roughly $362 million could be raised from a millionaire’s tax in North Carolina.

Researchers have proposed higher tax rates on higher incomes based on the idea that $1 for a very wealthy person doesn’t make a significant impact on their well-being in the same way that it would for someone with a much lower income. Furthermore, given the high concentration of wealth that exists in the hands of a few — which is overwhelmingly white — placing a higher rate on the highest incomes suggests that it would (1) only impact a small number of taxpayers and (2) begin to address the growing racial wealth gap.

In North Carolina, a higher tax rate on income over $1 million would reduce the size of the average net tax cut for the top 1 percent by 0.5 percent, or $6,461. This would, in part, address the upside-down nature of the tax code while making it less likely that the tax load will continue to shift to low- and middle-income taxpayers as growing needs must be met. Future policymakers would not be inclined to just raise the flat rate on all income but could continue to build a graduated rate structure on higher income.

While our state seeks to provide each of us with a high quality of life, it’s already struggling to keep up with investments needed in the classroom, in the infrastructure that ensures our communities are resilient and connected to opportunity, and in the protections and supports that promote healthy living environments. A millionaire’s tax — and moving to a graduated income tax structure that sets higher rates on higher income — can help North Carolina raise revenue for its priorities, decrease racial inequities, build economic opportunity, spur growth, and address, in part, it’s upside down tax code.