NC Budget and Tax Center

Senate proposal is another tax cut for the wealthy and profitable corporations

Senate leaders announced they will continue on the path to ruin for North Carolina by pushing forward another series of income tax rate cuts this year that will primarily benefit the wealthy and profitable corporations.

The proposal unveiled this morning will do nothing to boost the wages of working people nor will it help connect rural communities to opportunity, despite Senators’ claims.

Instead, by lowering the income tax rates on corporate profits and income, the proposal continues to lock in the already significant breaks to the wealthy and profitable corporations.  To date, North Carolina’s millionaires have received an average tax break of $15,000 since 2013 while the state’s poorest households are carrying a heavier tax load.

North Carolina’s profitable corporations contribute the lowest amount in the country to ensuring that the infrastructure, workforce development and education that they benefit from is effective and efficient.  Under this proposal, the state will continue to ask little of large multi-state corporations and underfund the foundations of a strong economy for our state.

The proposed changes to the standard deduction and child tax credit are ineffective to offset the already greater share of income paid in state and local taxes by the lowest income taxpayers in North Carolina. And the resulting pressure on local governments to raise property taxes and on future state lawmakers to raise sales tax to make up the losses from these tax breaks for the wealthy will make it difficult to invest in opportunity for all.

It is important for all North Carolinians to see the full plan of the North Carolina Senate. We must ask what will be eliminated from our communities to pay for these tax breaks.  We must ask who they will ask to pay more.

The proposal passed earlier this week to lock in a low and arbitrary income tax rate that primarily benefits the wealthy is part of the effort to eliminate the income tax entirely and push the tax load onto middle- and low-income taxpayers.  Not only is this not a pathway to prosperity, this is another step backward for North Carolina.

NC Budget and Tax Center

Statement from Budget & Tax Center on Income Tax Amendment

Statement from Alexandra F. Sirota, Director, Budget & Tax Center 

Senate Bill 75 passed off the Senate floor today in a move by state lawmakers that once again limits the possibilities for North Carolina. The bill seeks to make an unnecessary amendment to the state Constitution that will harm North Carolina’s future prosperity and the democratic process. 

The proposal will lock in what is essentially a giveaway to millionaires and likely shift the state’s reliance to the sales tax, while also putting more pressure on local governments to raise property taxes. This has always been a bad idea for North Carolina, and it still is.

By placing a low and arbitrary income tax cap into our state constitution, lawmakers are taking democracy out of the budget process. They are aiming to lock in their desired choices and limit the choices of North Carolinians tomorrow, 10 years from now and 100 years from now.  Under this amendment, lawmakers elected by North Carolina’s future voters will not have the tools to meet our state’s future needs.

This unnecessary bill shows a lack of responsibility for the common good. It will make progress impossible on shared goals such as improving teacher pay, ensuring every child is reading by third grade, and providing health and mental care to North Carolinians who need it. The results will be costly for us all and our state.

NC Budget and Tax Center

Still waiting: Eastern NC needs a greater commitment to rebuild after Matthew

When it comes to helping North Carolinians recovery from the devastating flooding and damage following Hurricane Matthew, North Carolina leaders must commit to a significant investment that ensures communities are made whole and more resilient in the face of future natural disasters and economic downturns too.

After the December legislation that made the first investment of $200.9 million, communities waited for a more ambitious proposal that would move beyond emergency response to focus on rebuilding the region.

The Governor’s budget proposal includes more dollars for the region but remains modest in comparison to the need. The proposed budget dedicates $115 million to address needs in housing, local infrastructure, public assistance, and other recovery efforts.

Legislation will be needed that is comprehensive and reflective of the needs to ensure that Eastern North Carolina is rebuilt to greater resiliency.

Hurricane Matthew was not North Carolina’s first time dealing with major post-hurricane flooding. In 1999, Hurricane Floyd caused what is now considered to be lower levels of flooding and damage throughout the East. Governor Hunt and the General Assembly reacted by allocating $830 million state dollars to ensure a swift and speedy recovery. In 1999, $286 million, more than one-third of the entire effort, was pulled from the state’s Rainy Day Fund.

Yet today, in response to Matthew’s, the General Assembly has been unwilling to use the Rainy Day Fund to help struggling North Carolinians get back on their feet. The investments have been too modest to ensure the Eastern part of the state can thrive. Click To Tweet The total investment in rebuilding from Hurricane Matthew by state leaders doesn’t come close to addressing the estimated $1.5 billion in damages spread throughout the eastern part of the state and represents a fraction of what was invested after Hurricane Floyd.

Gov. Cooper recognizes that the allocations in his budget are just a start. The budget also places $300 million into the Rainy Day Fund to be used once the final “unmet need” is assessed.

The problem, however, is that far too many North Carolinians can no long wait for final assessments to be made. While federal and state dollars slowly trickle in, many people remain living in hotels and out of work. They need help now.

The Governor’s Budget’s plan for Hurricane Matthew Recovery:

 

NC Budget and Tax Center

New report: Trump budget will put federal grants to NC and its local governments at risk

The Center on Budget & Policy Priorities (CBPP) has released a timely report titled “At Risk: Federal Grants to State and Local Governments”. The two major conclusions of the report are blunt: Federal grants matter to state and local budgets (accounting for approximately 30 percent of North Carolina’s state budget), and programs for low and moderate income families could bear the brunt of cuts based on proposals from President Trump and congressional Republicans.

This report comes out a few days before the White House is expected to release an outline of its 2018 fiscal year “skinny budget” on Thursday, March 16.

Here are three key points (and charts) from CBPP’s latest report that highlights some basic facts on federal grants and that North Carolinians should know:

  • Grants are at risk, and states cannot absorb the magnitude of the
    potential cuts without reducing services:
    The President’s forthcoming budget is reported to cut non-defense discretionary spending — the source of state and local discretionary grants — by $54 billion.” “In all likelihood, states and localities will be forced to scale back or eliminate services and programs for families, seniors, and people with disabilities, rather than raise their own funds to continue the programs at their current level.”
  • Grants are already at historically low levels: Discretionary (annually appropriated) grants to state and local governments in federal fiscal year 2015 were 1.05 percent of GDP, lower than in all but one year since 1980.”

  • Federal grants are vital to help finance critical programs and services on which low and moderate-income families and communities of every state rely on. Among the programs these discretionary grants support are:
    • Highways, airports, and mass transit
    • High poverty schools
    • Head Start
    • Community health centers
    • Training and employment services
    • Child protective services
    • Low-income home energy assistance
    • Child care
NC Budget and Tax Center

Speaker Ryan’s first tax cut bill for the wealthy: The American Health Care Act

There is much merit to arguing the problems with the American Health Care Act with regards to its failure to value human life and access to health care.  As a health care bill, it fails miserably.  As tax policy, it is equally disastrous.

Make no mistake: While wreaking havoc on the health care system and undermining the health and well-being of our neighbors, Congress plans to cut taxes for the wealthy and raise the costs for everyone else.

The repeal of two Medicare taxes paid by high income earners will primarily benefit millionaires.  These taxes also achieved greater equity in the treatment of unearned income under the tax code.  Repealing those two taxes would mean that a couple making $10 million would see their effective tax rate cut in half.

The changed structure of the tax credits will mean North Carolinians, on average, will see a more than $5,000 loss in help to pay their health care premiums.  In fact, the drop for the average consumer in North Carolina ranks us second in the nation.  This will likely mean that North Carolina will be hardest hit by increasingly unaffordable health care and also the likelihood of a rise in the number of uninsured costing everyone.

More detailed analysis of the tax credit provision shows that the House’s tax credit structure will primarily benefit North Carolina consumers in more urban counties and those who are younger.

The Kaiser Family Foundation has a series of interactive maps analyzing the impact on North Carolinians in different income and age groups.  Many reports have pointed to the nationwide findings:  Older, low-income and rural people will lose the most.  This is because of the tax credits as well as various other provisions of the House’s plan that allow older people to be charged more, eliminate help for out-of-pocket medical expenses and remove the individual mandate. Read more