NC Budget and Tax Center

Boosting investment in early childhood development, a no-brainer for NC

Early childhood development programs are not typically viewed as economic development initiatives, but they should be. Extensive research in this area finds that well-focused investments in early childhood development yield positive long-term public and private benefits. Furthermore, the return on early childhood development investments to the public far exceeds the return on most other economic development projects.

North Carolina has not done enough to ensure that access to quality early childhood development programs reach more children. The state dedicates just 1.1 percent of its General Fund budget to early childhood education.

Digging deeper, nearly 5,500 fewer Pre-K slots are available today than there were in 2009. This eroding state support contributes to the more than 7,200 children that were on the Pre-K waiting list last year. With an estimated 67,000 children eligible to participate in the Pre-K program, less than half are being served due to inadequate state funding. These are unfortunate realities for North Carolina despite studies showing that high-quality preschool can increase a child’s performance in the early school grades, boost high school graduation rates, improve chances of landing a job later in life and reduce criminal behavior, among other benefits. Read more

Commentary, NC Budget and Tax Center

Nothing has changed (Part 2): Reported amendment to GOP health care bill guts protections for people with pre-existing conditions

Last week, we reported reviving the GOP health care bill would mean more uninsured, costlier coverage in North Carolina. On Friday unfortunately, Republicans in Congress reportedly reached agreement on an amendment that would eliminate key Affordable Care Act (ACA) protections for people with pre-existing health conditions. Under the amendment, states could end some of these protections at will, and end others provided that they created or participated in a federal high-risk pool. Overall, it is clear the American Health Care Act (AHCA) is not fixable. Most Americans already know that almost every piece of the bill would cause people to lose coverage, make coverage less affordable or less comprehensive, or cut taxes for high-income people.

Below are key points related to this amendment, according to the Center on Budget and Policy Priorities.

The amendment takes us back in time

The reported Meadows-MacArthur amendment to the American Health Care Act (AHCA) would allow states to request waivers of key pre-existing conditions protections. This would effectively restore pre-ACA law with respect to these protections, making an already severely flawed bill even worse. The amendment would allow:

  • Insurers to once again discriminate against people based on their medical history.
  • Women would again be charged more than men for coverage. While proponents claim that the deal preserves the ACA’s ban on gender discrimination, eliminating Essential Health Benefit requirements means that women would have to pay more for plans that included maternity coverage.
  • Plans would likely be able to impose annual and lifetime limits on coverage — including for people who get health coverage through their jobs.

Before the ACA, 105 million people with private health insurance — the large majority of whom had employer plans — had policies that imposed lifetime limits on coverage. Waivers of Essential Health Benefit requirements could mean returning to a time when millions of people with health coverage were one major illness away from medical bankruptcy.

AHCA’s Underlying Flaws Remain

The reported amendment makes no changes to the underlying bill. Under the AHCA:

  • 24 million more people would be uninsured by 2026 — meaning 1 of every 10 non-elderly Americans who have health insurance coverage under current law would lose it under the AHCA. This would eliminate all of the coverage gains made under the ACA.
  • Medicaid would be cut by $839 billion over ten years. The bill would effectively end Medicaid expansion and radically restructure the entire Medicaid program by converting it to a per capita cap or block grant. Under the House bill, 14 million fewer people will be enrolled in Medicaid by 2026.
  • People who currently purchase coverage through the ACA marketplaces would see large increases in their premiums and deductibles, and other out-of-pocket costs. Total out-of-pocket costs (premiums, deductibles, copays, and coinsurance) would increase by an average of $3,600 for current HealthCare.gov marketplace consumers, with larger increases for older and lower-income consumers and consumers in high-cost states.
  • High-income people would receive billions of dollars in tax cuts, averaging over $50,000 per year for people with incomes exceeding $1 million.
NC Budget and Tax Center, Trump Administration

Three ways Trump’s “America First” budget puts hungry Americans last

When it comes to hunger, North Carolina stands out. Each night, almost 630,000 North Carolina households do not have enough to eat. With 15.9 percent of households being food insecure, North Carolina has the highest rate of hunger on the East Coast, and the 8th highest in the nation. Even amongst North Carolinians, hunger does not impact everyone equally. We know that children, households led by women, and seniors are far more likely to face issues of hunger.

While our state still has a long way to go in eliminating food insecurity, we have made strides in recent years. From 2013 to 2015, the state’s food insecurity rate dropped from 17.3 to 15.9 percent, largely in part to critical federal programs that help put food on the table for North Carolina’s most vulnerable. But with Trump’s proposed budget, these very programs are at risk for cuts and even elimination.

Here are three ways Trump’s budget threatens to increase hunger in North Carolina:

1. Cuts to the Special Supplemental Nutrition Program for Women, Infants, and Children

Trump’s budget cuts the Special Supplemental Nutrition Program for Women, Infants, and Children, known as WIC, by $200 million per year (from $6.4 billion to $6.2 billion). WIC provides healthy foods, formula and baby food, and health care support for pregnant and breastfeeding women, their infants, and children under the age of five. While this cut won’t kick off current participants, it will inhibit WIC’s ability to provide additional programming and services and could prevent WIC from serving new mothers and children in the future.

Last year, WIC served over 240,000 North Carolinian women and children each month and provided more than $123 million worth of food. In North Carolina, WIC has contributed to a drop in newborn Medicaid costs, increasing the likelihood of children receiving regular and preventative health services; lowered infant mortality rates; and is responsible for improved education performance for children.

2. Elimination of the Community Services Block Grant

The proposed budget completely eliminates the Community Services Block Grant (CSBG), a $718 million program, which supports local organizations working to alleviate poverty, hunger, and joblessness across the nation. In North Carolina, CSBG funds 35 Community Action Agencies that service 97 of NCs 100 counties, funneling nearly $21.5 million into high need rural, urban, and suburban communities. While CSBG funding supports a wide array of activities, one critical service is its role in providing emergency food assistance. These funds are used to organize and operate food banks, support North Carolina’s Meals on Wheels program, fund nutrition and food preparation counseling services, and even support community and urban gardens.

Nearly 40 percent of the 120,000 North Carolinians who are supported through CSBG funds are children, 20 percent are seniors, and more than 10 percent are individuals with disabilities.

3. Elimination of 21st Century Community Learning Centers

The budget seeks to eliminate 21st Century Community Learning Centers (21st CCLC), a $1.2 billion program that provides before-, after-, weekend-, and summer school academic enrichment. In North Carolina, this would mean a loss of $22.3 million to 68 school districts, local governments, and non-profits that currently operate these academic enrichment programs. Although increasing nutrition and access to food for children is not an explicit goal, these learning centers play a critical role in eliminating the food gap many children in North Carolina face. Last year, nearly 750,000 children in North Carolina received free or reduced-priced meals. Before and after school and during the summer, many of these children and their families are at risk of being food insecure. Meals provided at after school and summer enrichment programs are an extremely important and efficient tool at addressing childhood hunger.

The Trump Administration argues that 21st CCLC “lacks strong evidence of meeting its objective, such as improving student achievement.”. That’s not true. A 2014 evaluation of North Carolina’s 21st CCLC program proved that students who participated in the program saw larger and faster improvements on standardize testing scores than students who did not participate.

If we really want to make America great, we have to ensure that no American goes to bed hungry. Investing in these important and proven programs is critical for the health of our children, our economy, and our nation.

NC Budget and Tax Center

It’s official: Senate tax plan blows a serious hole in state budget

An article in today’s N&O highlights some important and sobering facts regarding the costly tax plan proposed by the state Senate. Most notably, the article points out that the NCGA’s Fiscal Research Division estimates that the Senate tax plan would create a hole in the state budget to the tune of nearly $600 million within the next three years.

Plugging this budget gap will likely mean state funding cuts to public schools, healthcare services, environmental protection and/or other areas of the state budget needed to pay for the tax cuts. Regarding the budget hole that the tax plan will create, Senator Jerry Tillman – a co-sponsor of the Senate tax plan and co-chair of the Senate Finance committee – is quoted in the N&O article as informing the public that “there are budget areas that can be cut as well as reserves that could be tapped.” Thus, cutting important public services to pay for more tax cuts is not a far-fetched idea, but rather a planned go-to option for proponents of the tax plan.

BTC’s analysis of the Senate tax plan shows that the tax cuts are not in fact targeted to middle class tax payers. Nearly half of the total net tax cut under the proposed tax plan would go to the top 20 percent of income earners in the state. By contrast, only 29 percent of net tax cut benefits would flow to the bottom 60 percent of income earners – those with incomes of $57,000 or less. Furthermore, a significant share of the net tax benefit will flow to profitable multistate corporations.

The N&O article makes  it very clear: Proponents of the Senate tax plan are more than willing to give more tax cuts to the already well-off and profitable corporations at the expense of public investments that promote broadly shared prosperity. This is state leaders’ brand of tax reform, which doesn’t look like it ends well for the majority of North Carolinians.

Commentary, NC Budget and Tax Center

Coming Trump/Ryan tax proposals promise giveaways to the rich; hard times for North Carolina

Donald Trump speakingAs my colleagues have detailed over the past few weeks, President Trump’s budget blueprint proposes significant cuts to major programs and funding that support economic opportunity, health and well-being of North Carolinians. These cuts will allow the President to pursue increases in defense spending.

They are also required if the President and Speaker Ryan are to pursue the kind of overhaul of the federal tax code that would reduce revenue significantly over time. As has also been noted, much of the discussion of the federal tax changes has also been tied to the repeal of the Affordable Care Act where savings from reducing health care coverage are hoped to allow for the depth of tax cuts desired.

While we wait for the details on federal tax changes from President Trump and Congress, it is useful to review past proposals. These proposals have included reducing the corporate income tax rate and eliminating the alternative minimum tax for corporations, reductions in personal income tax rates and transfer tax as well as elimination or capping of itemized deductions and increases in the standard deduction among many other changes.

Here is what analysts have found in reviewing these proposals.

  1. The tax plan Trump put forward during his campaign would increase the federal debt by $20.9 trillion by 2036.
  2. The “Better Way” tax plan proposed by Speaker Paul Ryan would reduce the effective tax rates for the most well-off Americans by 8 percent, a change that is four times bigger than the change in effective tax rates for any other income group.
  3. Both tax plans represent a significant tax cut for the top 1 percent of taxpayers.
  4. The Border Adjustment Tax proposal for how the US would tax corporate profits would be regressive, fail to end offshore tax avoidance and violate trade agreements.

Because North Carolina’s tax code is tied to the federal code in various ways, the changes at the federal level will have an impact on states’ revenue collection and who pays. It is difficult to say exactly what the end result for North Carolina would be not least because the state has changed so much of its tax code in recent years. However, as ITEP writes, from eliminating the estate tax to treatment of capital gains and interest to “ending the deductibility of state and local taxes, creating a new deduction for child care expenses, changing the taxation of carried interest, altering expensing of business investments, and other corporate tax changes such as “border adjustment” could all have ripple effects on state revenue systems.”

Most notable in the overall assessment of the current federal tax code proposals is that it will become less progressive. And that means many North Carolina taxpayers will face an even heavier tax load given the already regressive nature of the state’s tax code today.