NC Budget and Tax Center

NC Budget and Tax Center

Last week, the North Carolina House of Representatives approved a $22.2 billion state budget plan, which is overall a modest step towards building an economy that works for all North Carolinians. The budget represents a 5-percent increase over current year spending and the highest level of investments since the official economic recovery began in 2009.Yet, the plan still falls short of pre-recession levels of investments, fails to replace years of harmful cuts, and does not reflect all that’s needed to foster inclusive economic growth.

Unfortunately it is now clear—based on newly released spending targets—that the Senate is poised to severely limit spending rather than follow the House’s lead on making modest improvements. Low spending targets may be linked to the Senate leadership’s desire to “significantly” cut income taxes even further—a move that would hinder reinvestment in programs and fail to generate promised economic returns.

The Senate’s low spending targets make plain the shortsightedness of such an approach. For example, investments in public schools would only increase by .013 percent after accounting for enrollment growth. School systems and students would have to go without essentials that support academic achievement and completion, hindering the long-term growth potential of the state.

As the Senate moves forward in the budget process, budget writers should keep and build upon the House’s planned investments in the things that build a more inclusive economy so the state can better position itself to be competitive. Further deep tax cuts hinder lawmakers’ ability to achieve this goal. Below is a list of ten examples of economy-boosting investments and policy changes that the House included in its budget plan. Read More

NC Budget and Tax Center

This guest post was contributed by Nan Madden, director of the Minnesota Budget Project in St. Paul, Minnesota.

Minnesota is basking in some attention in news outlets across the nation highlighting its strong economy, low unemployment numbers and a median wage sitting above the national average.

That’s not the scenario painted two years ago by opponents of Minnesota’s tax reform bill. At the time, opponents predicted economic catastrophe. Instead, Minnesota is thriving.

In the last two years, Minnesota has made smart changes to its tax system that positions the state well for long-term economic growth. The 2013 tax reform plan came after years of budget deficits and deep cuts to public services, and it allowed the state to make investments that lay a strong foundation for prosperity, including increased funding for early childhood education, schools and more affordable higher education. These investments will pay off in the long run by producing the highly-educated workforce that has been one of the keystones to Minnesota’s economic success.

These changes also modernized the state’s tax system so that it generates adequate revenue for a thriving state in a 21st century economy, and made the distribution of taxes across income groups more even.

A vital component of the 2013 tax reform was the creation of a new income tax rate on the 2 percent of Minnesotans with the highest incomes. The package also raised revenues by ending several corporate tax preferences and increasing tobacco taxes. The 2013 tax reforms – as well as actions in 2014 – took additional steps to make Minnesota’s tax system less regressive. Lawmakers expanded Minnesota’s state Earned Income Tax Credit and increased property tax refunds for renters and homeowners.

And a study released earlier this year from the Minnesota Department of Revenue shows those efforts have moved us in the right direction. Overall, the tax changes made the past two years raised taxes on the highest-income Minnesotans closer to the state average, and lowered taxes for all other income groups. While our tax system is still regressive, meaning the percentage of income paid in taxes goes down as incomes rise, it will be significantly less so in 2017 than 2012. The highest-income Minnesotans still pay the smallest share of their incomes in total state and local taxes, but the gap between them and other Minnesotans has closed considerably.

After more than a decade of frequent budget deficits, Minnesota now is fortunate to have a $1.9 billion surplus for the upcoming two-year budget cycle. The surplus doesn’t mean the state should reverse course. As Minnesota’s legislative session enters its final weeks, we’re urging policymakers to continue on the path of making our tax system more fair and not offer large, unsustainable tax cuts to a privileged few.

While Minnesota’s economic success is making headlines today, the tax reforms taken over the last two years have set the stage for economic progress for years to come.

NC Budget and Tax Center

The budget passed by House members last week makes clear that North Carolina remains hampered by costly decisions made in recent years. Despite modest improvements in some areas of the budget, important public investments that drive the state forward remain well below pre-recession spending levels. The House budget is a reflection of choices and an example of missed opportunities.

Modest funding increases in the House budget are primarily the result of moving the goal post. For example, fully funding enrollment growth for our public schools and providing teachers and state employees a two-percent pay increase are typical budget practices, particularly in budgets crafted during a recovery.

The budget hikes various fees, increases tuition at community colleges, fails to reinstate the state Earned Income Tax Credit, and resorts to cutting funding from certain programs to fund others (e.g., the House reduced funding for textbooks in order to fund other areas of the public education budget).

Rather than address persistent underinvestment and seize opportunities to support a stronger economy, state lawmakers will allow another round of corporate tax cuts to go into effect – reducing annual revenue by $100 million in the first year, $350 million the second year, and more than $500 million in subsequent years.

Revenue lost just from these additional corporate tax cuts, which state leaders seem unwilling to debate, could provide funding for much-needed public services that strengthen our communities and the state’s economy. Read More

2015 Fiscal Year State Budget, NC Budget and Tax Center, Raising the Bar 2015

This post is part of a series on the budget featuring the voices of North Carolina experts on what our state needs to progress.  Elizabeth Grace Brown is a student at UNC Chapel Hill and is the author of this piece.

I’ve spent my entire educational life in North Carolina public schools, from kindergarten to today. My schools have always been excellent. I had good classroom sizes, dedicated and attentive teachers, and curricula rich in science, arts and literature. My schools strove to maintain a balance between supporting and challenging me. The guidance I received from teachers and faculty (and from my mother, who’s also a public school teacher in NC) led me to UNC Chapel Hill. But as I grew older and closer to graduation, I could already see that quality eroding. My elementary school’s magnet status was threatened, my high school had no books for us, teachers quit and students dropped out at alarming rates. I have benefited greatly from excellent public education, and budget cuts have put that education in jeopardy.

And I spent my primary education believing that if I worked hard enough, I could graduate and get an affordable, world-class college education in my home state, too. That promise, if it was ever true, certainly seems less and less within my reach every day. Every time tuition is raised, by the Board of Governors at the urging of the legislature, I go more into debt. Policy makers seem like their concerns about student debt revolve around parents and families paying tuition, but that’s not the case – my loans are on me. Asking your parents for help paying for college is a luxury that’s already out of reach for so many North Carolina students.

And I refuse to believe any longer that the increasing cost and declining quality of education in this state is something that these policy makers can’t help. Funding isn’t a just a question of allocating resources efficiently, it’s a question of values. And it’s clear that NC leadership doesn’t value education — not as much as they value tax cuts for the wealthy, or corporate subsidies. The most recent funding increases barely scratch the surface of the damage that’s been done under the guise of fiscal responsibility. Among this state’s politicians and leaders, talk of supporting education is plentiful – but talk is cheap.

And the lip service they pay to the value of education is selective, too. They love fields that will bring more profit to the already wealthy: finance, business and STEM, but not one of the forty-six degree programs that the Board of Governors just decided to cut. They don’t care for us to become critical thinkers, to know our own histories and the histories of our marginalized communities, to grow as people.

Steven Long of the Board of Governors made it clear when he said, regarding these program cuts: “We’re capitalists, and we have to look at what the demand is, and we have to respond to the demand.” They treat our education like it’s a commodity —  but they still expect us to pay more for less! As an Economics major, as a student, as an organizer and as a North Carolinian, I can tell you plainly — this doesn’t make sense, and this can’t last.

NC Budget and Tax Center

A powerful new initiative aimed at reducing childhood hunger will be available to around 1,200 high-poverty schools in North Carolina this upcoming school year. This initiative, known as community eligibility, allows qualifying schools to serve meals free of charge to all students, ensuring that children whose families are struggling to put food on the table have access to healthy meals at school.

Last year, North Carolina got off to a good start with nearly 650 schools using community eligibility to feed more than 310,000 kids. This upcoming school year, hundreds more schools are eligible to participate.

Results show that more NC children are eating school meals because of community eligibility, with a particular increase in the number of children eating breakfast. This means that more children are fueled up and ready to learn at school each day.

When children arrive at school hungry, it is very difficult for them to concentrate and do well in the classroom. By providing schools meals to all of our children free of charge, we are both reducing hunger and increasing their chances of student success. Read More