NC Budget and Tax Center

NC Budget and Tax Center

Policymakers have chosen to reduce state spending in recent budgets and appear poised to continue that approach even despite a recovering economy.   Such small thinking ignores the fundamental role of state budgets in supporting the broader economy and delivering opportunities to communities and families.

The state’s most recent budgets (and current budget proposal from the Governor) break dramatically with our state’s past and put at risk the foundations of a strong economy by spending at historically low levels as a share of the economy. An analysis of data back to 1970 on state spending shows that North Carolina today is dedicating a lower level of our total resources to public services than we did in 1973 (see graph). That year was the start to the 1973-1975 recession characterized by the oil crisis and stagflation, and largely recognized as the end of the post-World War II economic boom. It’s also when computers conducting sophisticated analysis took up entire rooms or buildings, office work had not yet been impacted by the use of personal computers and those that did exist could store just 16 lines of text.BTC - Collective Commitment 1973

Today, North Carolina has passed the fifth year of the official recovery from the Great Recession that started in 2007. For six years in a row state spending has continued to erode and the Governor’s budget would continue that trend.

Looking at state spending as a share of the economy, or total state personal income, is akin to the way in which federal budgets are assessed relative to GDP. Importantly it represents a reflection of our collective commitment to build an economy that works for everyone. Such a measure also provides a way to assess whether we are spending more or less over time while also considering that with economic growth there are more resources available and needed to support the economy.

The evidence is clear on this point: smart state spending is necessary to support positive economic outcomes. Read More

NC Budget and Tax Center

A new report by the Center for American Progress highlights state actions that have increased access to post-secondary education for all students regardless of immigration status.  The report outlines the importance of state legislation on tuition equity given the lack of federal progress on the issue.  But it also highlights the differences in experiences for students depending on where they live.

For those students living in North Carolina where tuition equity is not the law, the barriers to access and completion of a post-secondary education and skills training for future jobs are higher.  In Texas, where students are able to pay in-state tuition and access financial aid, the benefits have been real for those individuals and the broader economy and state.  The costs are also minimal:

Of the 1.3 million students enrolled in Texas public universities and community, technical, and state colleges during fiscal year 2012, 20,049—or 1.1 percent—benefited from the Texas DREAM Act and paid more than $40 million in tuition and fees toward higher education. Meanwhile, only 2,819 Texas DREAM Act students received state-sponsored grant aid at a cost of $9.56 million—just 2 percent of the more than $430 million in state-supported grants distributed to more than 130,000 students across the state.

These small costs also do not take into account the enormous tax contributions made by undocumented immigrants. In 2010, undocumented Texas residents paid more than $1.6 billion in state and local taxes, a portion of which went toward supporting Texas’ public colleges and universities.

Since the start of the new year, 12 states have introduced tuition equity legislation. 29 states have some type of legislation providing tuition equity to students without documents or with Deferred Action for Childhood Arrival status. It is time for North Carolina to move forward with tuition equity.

NC Budget and Tax Center

On Wednesday, the Senate Finance committee heard presentations that made the case for more changes to the state’s tax code. While beginning with many of the economic realities in North Carolina—stagnant and falling wages, persistently high poverty, and slow growth— the presentation prescribes the wrong medicine: more cuts to the income tax in favor of applying the sales tax to more goods and services.

It’s a surprising conclusion to reach as prior “reform” efforts based on income tax cuts for the wealthy and profitable corporations have not allowed North Carolina to invest in the state’s economic recovery. It’s even worse with evidence mounting that shifting more of the tax load onto average people is causing real damage.

It’s clear that more tax cuts for the wealthy and profitable corporations aren’t the best tools to address the economic issues highlighted in the presentation. Tax cuts do nothing to address the fact that workers aren’t seeing their wages grow, despite increasing productivity. Tax cuts that primarily benefit the wealthy and profitable corporations do not help alleviate poverty. Instead, such an approach jeopardizes the ability of the state to invest in pathways to opportunity—the schools, research and development, and business start-ups that create a vibrant economy.

We have long advocated for tax reform, and a genuine and thoughtful plan to modernize our tax code is still needed today – not in spite of 2013 tax changes, but because of them. But shifting the state away from the income tax to rely more on sales taxes, as the leadership presented yesterday, will make things worse, not better. It will not help address the ups and downs in revenue collections and will mean that everyday North Carolinians carry more of the tax load while wealthy taxpayers get a tax cut. This is especially true if such tax shifts don’t seek to offset a greater reliance on sales tax with a strong state EITC.

Here is what should be the focus of legislators’ reform efforts: Read More

NC Budget and Tax Center

As my colleague highlights in a recent blog, the governor’s proposed budget for the next two years fails to meaningfully reinvest in critical public structures, such as public education, that drive the state forward. This reality becomes much clearer when placing the governor’s budget into broader context.

Consider state funding for textbooks and other classroom-level resources for public schools. The governor’s proposed budget for FY2016 provides a small boost of $35 million in state funding for textbooks and other classroom-level resources. This spending increase partially restores harmful cuts state lawmakers have enacted since 2011 and is a step in the right direction. However, this is a textbook example of how the state can spend more but still fall short of what is needed to catch up and keep up with the needs of a growing student population.

Even with the proposed additional spending for textbooks, classroom materials, instructional supplies, and equipment, total state funding would be around half of the state’s investment level prior to the recession (see chart below). Furthermore, the proposed funding boost provided in the Governor’s budget is barely half of what the Department of Public Instruction requested on behalf of children in the classroom.

 

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When presenting his proposed budget last week, the governor acknowledged that his budget is “still extremely very tight” and that tough choices had to be made. This is the result of his decision to sign into law tax cuts that are costing upward of $1 billion per year – a self-inflicted reality that continues to drive underinvestment in public schools and other core areas of the state budget. North Carolina’s public schools play an important role in building a workforce that can compete for good-paying jobs in a dynamic 21st century. Failure to adequately invest in core public structures today will have a direct impact on the state’s future economic prospects.

NC Budget and Tax Center

State legislative leaders said tax plan changes were supposed to help most North Carolinians, while groups like the Budget & Tax Center cast skepticism at those claims, predicting that the average North Carolinians would see their share of the tax load increase as the richest in the state enjoyed tax breaks.

So what happened in your household? Did you see your state income taxes go up or down this year? How did it affect your family finances? Was the change worth the broader impact on your community and public services?

We want to hear from North Carolinians filing their taxes or preparing taxes for others. With the new Policy Watch feature Your Soapbox — The Tax Shift, we’re hoping to lift up the stories of those who have been most affected by the tax changes and what that means for their quality of life, their communities and public services. We are already hearing personal stories from people and their families who stand to be affected by the tax shift. One North Carolinian writes:

I am paying almost as much to the state in income taxes as I do to the federal government. For what? All I hear about is the state cutting services like unemployment, etc., for people like myself in the lower end of the economic scale. What I am getting for my tax dollar, exactly, except more grief?

Others are already seeing massive increases in their North Carolina income taxes. One family saw a whopping 564% increase between 2013 and 2014; instead of owing $251, this year they owe $1,415.00.

My (Stroke Victim) And my wife’s (Asthmatic) medical expenses for 2014 averaged $952.92. Medical expenses were not allowed as a deduction on the 2014 NC SIT [state income tax].

The NC Legislature also eliminated the Personal Exemption of $2,500 per person. Our income from Pensions, Social Security, and small investments increased 1.034% from 2013 to 2014. We have been significantly impacted by the 2014 SIT changes and definitely were not considered by Governor McCrory at the signing of the Bill when he stated “Everyone will benefit some from this bill.”

This is just the beginning of what will be likely be a widespread impact of the tax plan, one that will be felt by North Carolinians from across the state and from all walks of life.

Share your story using the submission form here. If you have photos, videos or other media you would like to include, please email them to Julia Hawes at julia@ncjustice.org.