NC Budget and Tax Center, News

As Biden introduces key cabinet members, economically stressed North Carolinians await a just recovery

Logan Rockefeller Harris

As President-elect Joe Biden formally introduces his economic team on Tuesday, there’s a long list of financial challenges facing many families.

Logan Rockefeller Harris, a senior policy analyst with the NC Budget and Tax Center, says North Carolina entered the pandemic with more than 1.4 million residents in poverty.

COVID-19 has also magnified gender inequalities in the labor market in unprecedented ways, with women in North Carolina being far more likely to file for unemployment than men, according to Harris.

As the Budget and Tax Center explains in a new report:

Economic insecurity is not an uncommon experience — almost 60 percent of Americans will experience poverty at some point in their adult life, and more than 3 in 4 will spend at least one year below 150 percent of the poverty level. But mass unemployment caused by the COVID-19 pandemic, combined with a total lack of sustained government response, has pushed levels of hardship to new extremes.

How should the new administration, Congress, and the North Carolina legislature address this daunting challenge?

Listen to Rob Schofield’s full interview with Harris below and read the Center’s 2020 Poverty Report.

 

Commentary, NC Budget and Tax Center

New state labor data: In NC, the COVID recession is over for some, but not for many others

The COVID-19 recession is over for a lot of highly paid North Carolinians, but the situation remains dire for low income workers. That’s the assessment of N.C. Budget & Tax Center economist Patrick McHugh. This is from a news release distributed today by the group:

State labor market data released today show the recovery continued to limp through October at nowhere near the rate needed to help families in the greatest need. While the recession is largely over for most highly paid North Carolinians, low-wage jobs across our state have been devastated.

“Even before COVID-19 cases shot up over the past several weeks, the recovery had slowed to a snail’s pace, particularly for low-income working people who are running out of options to get by,” said Patrick McHugh, Research Manager with the North Carolina Budget & Tax Center. “The U.S. Senate needs to get off the sidelines and actually do something meaningful to help North Carolinians who are bearing the brunt of the job losses.”

Click for charts with new labor market data.

Economic challenges facing North Carolina include:

  • The recovery has slowed dramatically in recent months: After recovering over 230,000 jobs in May and June, North Carolina has only added roughly half that number of jobs in the past four months combined. All told, over 40 percent of the jobs lost since the start of the recession have not been recovered and North Carolina still needs to add more than 265,000 jobs to get back to where we were before COVID-19.
  • Still a historically low share of North Carolinians are working: The headline rate only captures people who are actively looking for work, so it won’t reveal the true extent of job and income losses for North Carolina families. Only 55.2 percent of North Carolinians were working in October, down from over 59 percent before the COVID-19 outbreak and far below levels that were common throughout most of the 1990s and 2000s.
  • Recession is over for most highly paid North Carolinians while still devastating low income workers. While not captured in the headline unemployment figures, job losses have fallen the hardest on North Carolinians with the least financial cushion. Data through the end of September indicate the recession was effectively already over for North Carolinians who are paid over $60,000, while nearly 1 in 5 jobs which pay under $27,000 are still missing.

For charts showing the most recent labor data and COVID-19 job data, visit the Budget & Tax Center’s Labor Market page at www.ncjustice.org/labormarket.

Note: the Budget & Tax Center is a project of the NC Justice Center, parent organization to NC Policy Watch.

NC Budget and Tax Center

A lesson for NC: Raise taxes on high earners and everyone reaps the benefits

Across the country, voters passed a number of the progressive ballot measures , bringing millions of people in states like Florida, Colorado, Louisiana and Arizona closer to realizing higher wages, securing paid leave and sick days, and reducing inequality.

After more than nine months of the COVID-19 recession — on top of a decade of slow growth that failed to reach all Americans —people are looking for proven policies that will protect their families from further income losses, that will move their communities past the harmful reach of a paycheck-to-paycheck economy and on to the stability and promise of improved well-being.

There is also a growing recognition that public institutions — and adequate funding of them — is essential to our quality of life and to the support of our democracy. 

For example, the ballot measure Proposition 208 in Arizona.  It asked voters to support an increased tax rate on higher incomes to fund public education, which has long fallen short of the standards for a quality education for the state’s children. By placing an income tax surcharge of 3.5% on incomes over $250,000 for single filers or $500,000 for joint filers, Arizona schools will have the resources for instruction, student supports and teacher pay, as well as professional development of new teachers.

Such a proposal in North Carolina would go a long way to helping  to fix the documented constitutional violation in our state of providing a sound, basic education to every child. If North Carolina raised its current flat income tax rate of 5.25% by just 3.5 percentage points, bring it to 8.75% only on high-wage earners, as in Arizona — that would provide $1.12 billion for investment in public education. Given North Carolina’s income tax cap, even raising the rate on these higher incomes to the limit would provide $560 million in resources. 

Ninety-nine percent of the tax increase would affect the top 1%. The bottom 95% of taxpayers in North Carolina would experience no change in their income taxes.

It makes sense for North Carolina’s policymakers to start looking at higher rates on higher incomes. Not only has the state failed to meet its constitutional obligation to provide every child with a sound, basic education, but the pandemic is also wreaking havoc on public schools across the state. Economic fallout from the virus has revealed the threadbare supports resulting from a decade of underinvestment in public health, affordable housing and social services. 

For North Carolina, the fix to our current challenge of growing inequities and hardship will likely require additional changes, as well as work to remove policies like the arbitrary income tax rate cap in the state Constitution. It is therefore all the more urgent that policymakers get to work right away; like the pending vaccines developed from years of research and investment, starting to invest now in our future will make us all more secure. 

COVID-19, NC Budget and Tax Center

For many in NC, the economic picture remains bleak

As the COVID-19 pandemic rages on, North Carolina families continue to face difficulty making ends meet. The U.S. Census Household Pulse Survey provides insight into how different groups of people are faring.
The data show that millions of North Carolinians are finding it difficult to pay for usual household expenses during the coronavirus pandemic. Black people and multiracial people reported the greatest level of difficulty, with 27 percent and 25 percent respectively finding it very difficult to afford the basics. Asian people reported the least difficulty, as only 4 percent reported that it was very difficult to pay for usual expenses.

White and Latinx people reported similar levels of extreme difficulty , but nearly twice the percentage of Latinx people reported it was somewhat difficult to pay for household expenses as their white counterparts.

Women, 36 percent of whom reported it was either somewhat or very difficult to make ends meet, are facing more hardship than men, 22 percent of whom fell into the same category.

This data suggests that the economic inequality that existed before the pandemic will likely continue to widen unless swift and robust action is taken to address persistent disparities. People of every gender, race, and ethnicity deserve the dignity and quality of life that is only possible when we achieve economic security for all.

Leila Pedersen is a policy analyst with the N.C. Budget & Tax Center.

Commentary, COVID-19, NC Budget and Tax Center

NC “Extra Credit Grants” program leaves out families with the greatest need

As North Carolina works to recover from the COVID-19 recession and rebuild our economy, direct cash assistance can provide critical financial support, boost aggregate consumer demand, and improve the well-being of families and communities. To be effective, cash assistance programs should target families with the greatest need and leverage the existing public infrastructure. Unfortunately, flaws in the design of North Carolina’s Extra Credit Grants program are preventing thousands of families with children who are living in poverty from receiving the financial support they need now.

The Extra Credit Grants program was created in September with federal Coronavirus Relief Funds — nearly all of the CRF dollars that remained — to help parents with the cost of virtual learning and child care. According to the new law, each eligible household with a qualifying child should receive a $335 grant. Up to $5 million was allowed to be used for administration of the program.


Eligibility

To automatically receive the grant, households must have filed a 2019 state income tax return, lived in North Carolina for all of 2019, and reported at least one qualifying child on their taxes.

Legislative sponsors indicated on the floor of the General Assembly that grants should be phased out for people who filed single with more than $200,000 in annual income and people who filed jointly with more than $400,000 in annual income. Even if grants were phased out in accordance with the federal child tax credit, about 25 percent of the total grants expected to be distributed would go to households with annual incomes of $100,000 or more.

Administration

Because the state chose the North Carolina Department of Revenue (NCDOR) as the state agency to administer the program, people who were not required to file state income taxes because they did not make enough money in 2019 had to apply separately to receive the grant. NCDOR made online and paper applications available from Sept. 17 to Oct. 15, 2020, but despite some advertising about the program, only a small fraction of eligible families applied for the grant before the deadline.

Result

By estimation, well over 200,000 families were likely eligible for the Extra Credit Grant, but they needed to apply before the Oct. 15 deadline. According to NCDOR, there were 14,910 online applications and 262 paper applications, which means only about 6 percent of the eligible families successfully applied.

The stated purpose of the Extra Credit Grant Program was to provide “economic support to assist with virtual schooling and child care costs during the COVID-19 pandemic” for families with children. Flawed policy design, poor targeting, and arbitrary deadlines have prevented hundreds of thousands of North Carolina families from accessing the financial support they needed most.
Direct cash assistance can be an efficient and effective way to assist families that face barriers to economic security. Getting emergency money to people experiencing a crisis also helps to boost the economy by ensuring that people can pay for the goods and services they need. Filling the holes in our social safety net and ensuring that families with the greatest need can access public services and supports will pave the way toward economic recovery and help North Carolina build back better.

Policy Recommendations

The road to economic recovery requires robust and targeted interventions from federal, state, and local governments. Leveraging existing public infrastructure will help target and place dollars in the hands of people who need it most. The North Carolina Department of Health and Human Services is an ideal home for targeted cash assistance programs because the department already maintains databases and administers programs to help families access anti-poverty support. Bolstering existing programs like the state’s Work First program, also known as Temporary Assistance for Needy Families (TANF), by increasing cash assistance payments and removing barriers for families seeking to access the program would go a long way toward helping families with the most urgent needs.

A refundable state Earned Income Tax Credit would reach a broader group of working families who have been hit hard by COVID-19 and provide cash assistance leading to increased economic security for all.

Leila Pedersen is a policy analyst with the N.C. Budget & Tax Center.