NC Budget and Tax Center

Temporary re-opening of government is no solution

Last Friday afternoon, the President announced he would support a bill that would temporarily open the government until Feb. 15. Quickly following the announcement, both the House and Senate moved forward legislation to approve this measure and the President signed the bill late Friday evening.

The temporary re-opening of government agencies will allow federal workers to return to work and receive back pay while lawmakers continue to negotiate a longer-term funding proposal.  Still on the table and strongly desired by the President is funding for the proposed southern border wall that precipitated the original shutdown.

The re-opening of government is an important first step in recognizing both that the federal government provides critical services such as protecting air travel and providing food assistance to families, and that federal workers, like all workers, play a critical role in the functioning of our economy.  

It is important to note that bouncing back will not be easy and that:

  • Some government agencies will face long backlogs that will take weeks, if not months, to address.  
  • Uncertainty remains such that programs and services for those Americans (and North Carolinians) most in need should likely continue to prepare contingency plans should government shutdown again.
  • Economic damage has been done.

Given the temporary nature of the measure and the seeming lack of change in positions in the original debate, this measure does not take away the possibility of a future shutdown (or an emergency declaration for that matter). Both have been threatened should Congress not approve the border wall that President Trump has demanded.  

In that way, our communities remain under the threat of a fundamental shift in the way that our budget priorities are negotiated — where now shutting down the government and services delivered across the country is on the table. It should never be — especially not as a way to strong-arm racist and unpopular policy.

NC Budget and Tax Center

UPDATE: New and damning details emerging on impact of the government shutdown

Dr. Patrick McHugh of the N.C. Budget and and Tax Center has created a lengthy and detailed update to the list of federal government shutdown impacts that he first published two weeks ago. In the updated version of “The creeping impact of Trump’s government shutdown,” readers will find new and sobering details regarding the shutdown’s impact in such vitally important areas as:

  • federal workers and contractors
  • food aid
  • housing assistance
  • Native American health and social services
  • the Temporary Assistance for Needy Families program
  • disaster recovery programs
  • farm assistance
  • small business and home loans
  • EPA permitting
  • federal parks
  • the IRS
  • public safety, including domestic violence prevention
  • the federal courts
  • immigration law enforcement

Click here to access and share this newly updated list.

NC Budget and Tax Center

Federal government shutdown affecting housing access

The partial federal government shutdown is worsening the documented affordable housing challenge across North Carolina by disrupting the systems that provide housing support and assistance in various forms to families across the country and state.

Most directly, the partial government shutdown has affected the operations of Housing and Urban Development programs, with 95 percent of personnel furloughed, and the ability of the agency to renew contracts for project-based rental assistance. Nationwide, this project-based rental assistance goes to private landlords and fills the gap for more than 1 million households living on low incomes who pay rent and for whom the rental assistance fills the gap from that amount up to the contract rent.

In North Carolina, an estimated 118 contracts have expired or will expire through February, affecting the availability of early 2,000 units statewide. The map below provides a view of the counties where these contracts are currently at risk because of the shutdown.

Click here for an interactive version of this map. 

Read more

NC Budget and Tax Center

Report: Corporations are stiffing North Carolina on $373 million in state taxes

We all know that rich shareholders and global corporations find ways to avoid paying their fair share in taxes, often through complex accounting schemes that boggle the mind. That’s why everyone should take heed of a new report showing that a few tweaks to North Carolina’s corporate tax code could stop global companies from dodging an estimated $373 million in state tax obligations.

It turns out that state leaders can ensure that companies pay the proper amount of taxes on income generated from business conducted in their jurisdictions, but existing tax codes at the state level often allow loopholes for smart corporate tax lawyers to exploit. Corporations often use accounting sleights of hand to move income around within the United States and to offshore tax havens, regardless of where the sales and production that created that income took place.

Adopting a policy generally known as “combined reporting” that bases a company’s income tax bill on how much of its activity takes place within a given state would prevent large companies from ducking an estimated $17 billion in state taxes that they are currently avoiding. Here in North Carolina, preventing companies from exploiting domestic tax havens (like Delaware) could bring in an additional $151 million in revenue, and stopping the practice of parking income outside of the United States could net another $222 million.

Global tax avoidance doesn’t just leave the rest of North Carolinians to pick up the tab, it undermines homegrown companies that don’t have a footprint outside of the state. When global corporations hide income in corporate tax havens, they often get a leg up on companies here in North Carolina that actually pay their state taxes in full, making it all the more difficult for smaller enterprises to contend with their global competitors.

Global corporations have already gotten enormous breaks on their federal and North Carolina taxes in recent years which only tilted the economic playing field further in favor of the very wealthy. It’s high time that we compel wealthy shareholders and profitable corporations to reinvest in the county that made them rich in the first place.

As legislators return to Raleigh with a long list of vital public needs to address, and not nearly enough state revenue to do the job, this report provides some invaluable guidance. Preventing large corporations from dodging taxes is a win for mom-and-pop businesses, for resident North Carolina taxpayers, and would make our tax system far more balanced than it currently is.

Commentary, NC Budget and Tax Center, Trump Administration

As shutdown lingers, unemployment insurance claims for N.C.’s federal workers in holding pattern

President Donald Trump (Credit: Gage Skidmore/Wikimedia Commons)

As highlighted last week in The News & Observer, the federal shutdown is having another ripple effect through North Carolina.

That’s because recent state policy changes make it harder for agencies to respond to community needs that arise when the unexpected occurs.  Federal workers’ claims to receive unemployment insurance are not being paid, leaving a critical stabilizer to household budgets and local economies unavailable to far too many in our state.

The article noted that the state unemployment insurance system is accepting claims but not currently issuing payments for claims made by federal workers affected by the shutdown. A look at weekly claim numbers confirms that there is, as yet, no spike in the number of claims issued over the extended federal shutdown.

In part that is due to the complicated nature of the shutdown, where some federal workers are showing up to work without pay, while others are furloughed. In the case of those essential workers working without pay, current guidance suggests these workers are not able to claim unemployment insurance.

However, questions remain about the urgency for federal workers, enough so that Gov. Gavin Newsome in California is considering providing unemployment insurance to these workers. Guidance says furloughed workers can receive unemployment insurance benefits, but will need to repay the benefits when the shutdown ends and back pay is received.

Many states have proactively made clear the guidelines for those federal workers affected by the shutdown, including prominent placement on websites about the claims process and making clear their willingness to support workers through this difficult time.

In North Carolina, state changes make the matter even more complicated. New requirements state that the Division of Employment Security must give employers 10 days to respond to a claim before moving that claim forward. But right now, many employers themselves are difficult to reach because they are not at work. A second requirement — reporting on the number of work searches —is impossible for most federal workers to meet because they are not looking for work but instead waiting to be recalled.

For contract workers and others whose employers have been impacted by the federal shutdown, their job loss, through no fault of their own, leaves them to access a flawed North Carolina unemployment insurance program — one that replaces the lowest share of lost wages of any state in the country for the fewest number of weeks, and with the lowest recipiency rate in the country.

A number of states are taking steps to ensure federal workers and those affected by the shutdown are able to access unemployment insurance.  Gov. Michelle Lujan Grisham of New Mexico proposed waiving work search requirements. Massachusetts Gov. Charlie Baker is weighing providing unemployment benefits, including tapping into state funds to do so, so that people have the security of dollars coming in to stabilize their budgets.  Read more