NC Budget and Tax Center

NC Budget and Tax Center

It is becoming ever clearer that recent tax cuts have not endeared North Carolina to the entire business community. Proponents of the 2013 tax cuts argued that they would create a more competitive and business-friendly climate. Looking at recent business climate rankings, however, undermines this argument in two key ways.

First, multinational corporations already liked North Carolina just fine before the latest tax cuts. Second, the tax cuts have undermined our economic competitiveness in other important areas.

The 2014 Top Competitive States ranking by Site Selection, in which North Carolina is ranked #1, suggests that the tax cuts worked. However, North Carolina has consistently been at or near the top of the Site Selection rankings for a decade, including being #1 in some years prior to the 2013 round of tax changes. This ranking is largely based on the level of private capital investment a state secures, the number of jobs created, and a state’s tax climate – as determined by the conservative Tax Foundation. Essentially, low tax rates and high levels of capital investments – made possible in part due to generous economic incentives provided to corporations by state governments – benefits a state’s performance in this ranking. Read More

NC Budget and Tax Center, Uncategorized

As state lawmakers negotiate behind closed doors on a final budget deal, North Carolinians came together on Twitter to have their say on the smart investments that will best move the state forward. North Carolinians know that if we want to build a more inclusive and prosperous state for everyone, the state budget is key to getting there. Securing that goal, however, requires state lawmakers to pursue fiscal policies that enable North Carolina to reinvest and rebuild in the foundations of a strong economy.

Better choices are available than the ones that the Senate and House leadership are pursuing. That’s why every day North Carolinians and representatives from advocacy groups participated in a Twitter Chat, using the #MyNCBudget hashtag. Participants quickly pointed out that further tax cuts—as proposed in both the House and Senate budgets—would hamper the state’s ability to realize their vision for investments that benefit children, families, and communities across the state. They urged lawmakers to reinvest in early childhood education, K-12 and higher education, healthy communities, justice programs, living-wage policies, and a lot more.

There were so many strong voices that the conversation was trending in the Raleigh market. You can check out the conversation on Twitter at #MyNCBudget. Below is a preview of the discussion. Read More

NC Budget and Tax Center

Within the last month, policymakers in three states approved tax changes that will strengthen family economic security and support a stronger, more inclusive economy. Policymakers in New Jersey and Rhode Island approved expansions in their state Earned Income Tax Credits (EITC) and California officials adopted its first state EITC, which goes to people that work but earn low wages so that they can better make ends meet and avoid raising their children in poverty.

North Carolina is no longer among the 26 states that have a state EITC. Our state lawmakers allowed the state EITC to expire in 2013 when they enacted deep tax cuts that primarily benefited the wealthy and profitable corporations. The result was a tax shift—away from the wealthy and onto everyone else—that did nothing to improve the financial well-being of people who work hard for low pay and struggle to pay the bills.

On the other end of the spectrum, New Jersey lawmakers approved an increase in its state EITC to 30 percent from 20 percent of the federal credit that will benefit over half a million families. Read More

NC Budget and Tax Center

With one day left in the current 2015 fiscal year, state lawmakers reached a stop-gap spending deal today that would avoid a shutdown and keep state programs and services operating until August 14. The House approved the deal—known formally as a Continuing Resolution—tonight, with the Senate poised to follow suit tomorrow morning.  The deal is required because the state House and Senate leadership will not be able to iron out the differences between their respective budgets by time the new fiscal year begins on Wednesday, July 1.

State legislative leadership opted for a 45-day continuing resolution to fund state government. It would fund current programs and services at existing levels, with three major exceptions that are listed below.

  • Budget cuts to programs, services, and vacant positions would not receive funding under the temporary deal if the House and Senate included identical cuts (i.e. items that are not in controversy). Filled positions that are cut and not in controversy would receive a 30-day notice before termination. It is unclear how many positions would be cut under the temporary deal.
  • Public schools would receive additional money to cover the costs of student enrollment growth. There is no additional money for Teacher Assistants, driver’s education, or reduced classroom sizes—which are major points of contention between the House and Senate approved budgets. As such, local school districts are left waiting for a complete budget picture for the upcoming school year.
  • Beginning teachers would receive another boost in pay, to $35,000 from $33,000. But the deal freezes pay for the remaining teachers and all state employees. Raises will be negotiated upon going forward.

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NC Budget and Tax Center

With lawmakers set to hammer out a final state budget, North Carolinians are hearing a lot of misleading claims about the inability to afford important investments in the state’s economic future. Unmentioned is that the state’s constrained finances – at a time when the economy is improving – stem from the decision to sharply cut taxes over the past three years instead of building a strong foundation for lasting growth.

So when policymakers say that making investments in one area of the budget limit the ability to invest in other areas, they are right in lamenting limited resources. But they are offering false choices because they leave out the fact that the limits on resources available to help North Carolinians build a secure future come from House and Senate leadership prioritizing tax cuts over investments that drive the economy forward. And these constraints are likely to continue far into the future because the proposed House and Senate budgets include tax cuts that cost anywhere from $650 million to $1 billion over the next two years, depending on which version of the budget the two houses eventually agree to enact.

By locking themselves into these false choices legislators fail to acknowledge that halting further tax cuts would help ensure that schools have the resources they need and that important supports are available to promote healthy and safe communities.

Let’s sort out some of these false choices and shed light on how different it could be if the state had taken the common-sense path of avoiding such damaging tax cuts.

  • Classroom Teachers vs. Teachers Assistants. Today, our schools have nearly 4,800 fewer classroom teacher positions and more than 7,000 fewer state-funded teachers’ assistants than in 2009, which is especially bad considering there are 43,000 more students in our schools. The Senate budget drastically reduces funding for teachers’ assistants and provides some additional funding for classroom teachers. But neither the House nor Senate budget would restore the number of teachers and assistants to the 2009 level. Without tax cuts, North Carolina could invest in teachers and teachers’ assistants, providing the next generation a better shot at getting the skills to compete in a global economy.

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