NC Budget and Tax Center

Poverty and Policy Matters

If you work, you deserve to get paid. Sadly, in these times, even that statement is controversial (just see all our wage theft work).

So if it’s hard to even get workers paid, period, it shouldn’t be surprising that there are still opponents to the idea that women deserve equal pay for equal work. Maddening, but not surprising.

Today is Equal Pay Day, and new article from WomenAdvanNCe highlights the all-too-trouble wage gap that still exists. The piece reports on some statistics you’ll have heard (nationally, women make 78 percent of the salary earned by men doing the same job) and some you may not have.

As is often the case, the numbers get most tragic and shocking when broken out by race:

For North Carolina women, the statistics are slightly better. We make 82 cents on the dollar on average, but those numbers plummet for minority women: African American women in North Carolina make 64 cents on the dollar, while Latina North Carolinians make less than half of what men make at 48 cents on the dollar.

Sad and angry about this? You have a right to be. Want a good laugh that makes this same, all-too-salient point? Check this out.

 

Poverty and Policy Matters

There are few situations in life that are clearly win-win. When you see one, you have to take advantage of it.

That’s why North Carolina should reverse course and expand Medicaid. When you have the chance to improve health care for hundreds of thousands of people and actually save money, you should jump on it.

In a recent News & Observer editorial, the paper called the decision not to expand Medicaid “wildly irresponsible and hugely expensive.” That’s precisely correct, and let’s explore the first part of the statement a bit more.

Turning down Medicaid expansion turns down $50 billion in federal funding and prevents roughly 400,000 of our neighbors from getting covered. That makes expanding Medicaid an obvious choice.

But also consider that preventative care saves money over the long run. Insuring people means they get to go to the doctor, which means we pay less to prevent disease. This leads to lower costs for taxpayers and better lives for our people. An excerpt from the N&O piece:

Community Care said in a news release: “The medical costs for low-birth-weight babies average $49,000 in a baby’s first year of life, or more than 10 times more than babies born without complications. A low birth weight also increases a child’s risk for long-term medical and developmental complications and the likelihood of incurring additional expenses for social services and educational needs in later years.”

Kate Berrien, manager of Community Care’s pregnancy project, said North Carolina now leads the South in having the fewest births before 39 weeks. That’s a lot of savings and a vast increase in the quality of life for many children born to low-income mothers. And it’s an achievement attributable to innovations in community-level care that were developed in North Carolina and are being adopted across the nation.

It’s a win-win situation. Tom Wroth, CCNC’s chief medical officer, said, “We’ve been able to align improving clinical quality with lower cost.”

Read that last paragraph again. Improving quality care with lower cost is a win-win. So is expanding Medicaid.

NC Budget and Tax Center, Raising the Bar 2015
Editor’s note: This is an installment in “Raising the Bar” — a new series of essays and blog posts authored by North Carolina nonprofit leaders highlighting ways in which North Carolina public investments are falling short and where and how they can be improved.

We have been highlighting the views of experts about where North Carolina needs to invest to have the maximum impact and will continue to do so throughout the budget debate. The combined potential of smart spending with adequate revenue can improve the state’s economy and ensure more people can contribute to the activities and institutions that make our state great.

There has been very little, however, to suggest that policymakers are willing to tackle the challenge of a tax system that no longer is capable of supporting the core public services that deliver opportunity. Instead, there continue to be proposals to cut the income taxes and shift limited revenue around without addressing the fundamental issue that there are too few dollars.

As we have written about at Prosperity Watch, the state’s revenue is not only coming in far below projections it is growing far below historic averages. The result is that today we don’t have the revenue needed to invest for our future. And in that future we can anticipate ongoing self-inflicted revenue challenges unless policymakers address the inadequacy of our tax code.

North Carolina is not broke. There are the resources to make a commitment together to building that foundation. It will require that the state’s wealthiest residents—who have captured the entirety of income growth since the recovery began—and profitable corporations—who continue to reach record profits—contribute according to their ability. They, like the state, stand to benefit. After all a stronger economy is possible when more Tarheels are educated, more businesses have skilled workers, more main streets have vibrant small businesses and more communities are safe and healthy places to live.

Here are some of the big picture ideas that policymakers should consider in developing a tax system that can achieve our shared goals of strengthening the state’s economy and supporting families and communities across the state.

  1. Restore an income tax rate structure that ensures that all taxpayers carry an appropriate share of the tax load. This could provide $390 million if you keep the current 5.7% rate for the majority of taxpayers and add two brackets for the wealthiest in the state.
  2. Restore a vital tax credit for low-income working families before expanding the sales tax any further.
  3. Make sure that large, profitable corporations are paying to support the services they use and benefit from. This could provide $200 million if the corporate income tax rate is set at 6 percent which is in line with the region.
  4. Eliminate special-interest tax preferences that aren’t helping the state’s economy.

North Carolina has the capacity to make sure that our investments can grow an inclusive and strong economy. Policymakers just need to recognize—as they have done in the sales tax allocation debate—that revenue serves as the mortar in the foundation to supporting a vibrant economy.

NC Budget and Tax Center

There are lies, damn lies, and state business climate rankings.

Okay, that’s not exactly what Mark Twain said, but he might have been tempted to swap out statistics as the target of wit had he witnessed the recent proliferation of state business climate rankings.

Many of these rankings merely cloak ideology with the veil of science, as is the case with one of the worst offenders, Rich States, Poor States, which was released Wednesday.

The new report ranked North Carolina as the 4th most competitive state in the country, following a meteoric rise from the middle of the pack a few years ago.

Some leaders in Raleigh will point to this as evidence that tax cuts, slashed government spending, and reduced employee protections are making the state a better place to do business. There’s just one small problem: these rankings have almost nothing to do with economic reality.

First, a bit of background. The report is put out by the American Legislative Exchange Council (ALEC), a deep-pocketed organization dedicated to cutting government, ending progressive taxes, undermining workers’ protections, limiting the minimum wage, and generally opposing any move to make the market function in a more equitable manner. The report’s primary Author, Art Laffer, is widely seen as the inventor of supply-side economics, a theory that even former President George H.W. Bush described as “voodoo economics.”

Long story short, this report is designed to further a very specific policy agenda, not to take a sober look at what actually makes states economically competitive.

Given the agenda behind the report, it is hardly surprising that past rankings have almost completely failed to predict actual economic performance.

A thorough analysis from Good Jobs First showed that, at best, state rankings in 2007 had no relationship with how state economies performed from 2007 through 2011. In fact, good rankings on the ALEC scale were more likely to be a sign of bad things to come. For example, growth in per capita income was actually slower among states that ALEC had ranked as the most competitive. The same was true for median household income and total non-farm employment.

ALEC has convinced far too many decision-makers that its rankings actually capture competitiveness. Rankings are often intuitively appealing, particularly when you are predisposed to agree with the worldview of the authors, but that’s the danger of ALEC’s recent rankings.

They have the trappings of science (lots of charts, tables, and numbers) but none of the intellectual rigor that real economic analysis requires. If past performance holds true, North Carolina’s surge to the top of the ALEC ranking portends problems not prosperity.

NC Budget and Tax Center

For all of the positive growth numbers touted at the statewide level in the last year, the recovery ranges from partial to virtually nonexistent in many parts of the state. The headline unemployment rate dropped for most counties between February 2014 and this year, but unfortunately that is not a sign that all in well. As can be seen when you look at the current labor market conditions and how counties stack up to where they were before the recession, there are many communities where employment is still below pre-recession levels, some communities that actually lost jobs during the last year, and people looking for work outnumber job openings in most counties.

Most counties have not returned to pre-recession levels of employment. While the last few years have seen the state make some good economic strides as the national economy has continued to improve, it has not done enough to get most communities back to the level of vitality that existed before the Great recession. The majority of counties in North Carolina (70 out of 100), had fewer jobs in February 2015 than they did in 2007. In fact, the unemployment rate is still higher now than it was in 2007 in more than 80 counties across the state.

Unemployed people outnumber job openings in almost every county. Only 8 counties in North Carolina have at least as many job openings as unemployed people. Many counties have 2 or 3 unemployed people for every job opening, and in some counties there are as many as 5 or 6 unemployed people competing for every job. The number of people who are looking for work did come down in most counties from February 2014 through this year, but there are still far more people looking for work than there are jobs. In fact, roughly three-quarters of the counties had more people looking for work in February of this year than they did in 2007. There are still too few jobs for those who want to work which not impacts jobless workers but everyone as employers aren’t compelled to provide wage increases to keep or attract talent.

Many counties took a step back over the last year. While it is cause for pause that most counties have not returned to pre-recession levels of employment, the fact that almost half of the counties (47) lost employment from February of 2014 to February of 2015 is cause for a full-on double-take. 2014 was the strongest year for job creation since the start of the Great Recession, yet nearly half of the counties lost jobs during that time. That’s an extremely alarming sign. It is natural to expect some counties to grow faster than others, but a truly strong growth period should not be leaving so much of the state worse off.

All told, the February county labor market data show that North Carolina is not uniformly on the road to prosperity. There are pockets of very strong growth in and around the major metropolitan areas, but the labor market outside of the urban centers is much weaker. As the General Assembly talks about another round of tax cuts, and spending more on incentives, remember that these have been the proposed answers for several years, and they have not delivered the goods for many communities in our state.