immigration, NC Budget and Tax Center

Trump’s public charge is a new threat to immigrant families

The Trump administration is once again attempting to restructure a longstanding policy in U.S. immigration law. Last week, the administration published a proposed change to the public charge rule in the Federal Register, setting off a period of public comment.

Under the proposed change, an individual deemed a public charge may be disqualified from adjusting their status to a green card or obtaining certain visas. The changes will place greater emphasis on income and penalize people for accessing programs that they are eligible for to help them make ends meet.

Following a track record of putting money over people, this Administration seeks to punish low-income working people and families. Under the proposed rule, a public charge assessment will consider federal public benefits such as SNAP (also known as “food stamps”), non-emergency Medicaid, Medicare Part D, and housing assistance. Since the assessment measures the totality of circumstances, other factors considered are age, ability to work, health history, education, and financial status.

The proposed rule will not impact immigrants residing in the country due to humanitarian reasons such as refugees, asylum-seekers, domestic violence and human trafficking survivors. It will also not consider benefits received by U.S. citizen children. Read more

NC Budget and Tax Center

North Carolina’s tax code isn’t helping the state’s growing inequality

The release last week of new data from the Institute on Taxation and Economic Policy (ITEP) documenting who pays what in taxes across all 50 states confirmed that North Carolina continues to fall short of ensuring that our state and local tax system doesn’t ask more from middle and low income people.

Despite claims by the architects of North Carolina’s failed tax-cut experiment, policy choices since 2013 have not ensured that middle and low-income taxpayers are paying lower shares of their income in state and local taxes. Instead the richest taxpayers—whose average income is more than $1 million—continue to pay 33 percent less in state and local taxes as a share of their income than taxpayers who have averages incomes annually of $11,000, a threshold that aligns with deep poverty.

A useful way to look at whether incomes in the states are more equal, or less equal, after taxes has been developed by ITEP with the release of their Who Pays data last week. The ITEP Inequality Index compares incomes at various points throughout the income distribution both before and after state and local taxes are collected. The actual calculation involves numerous steps, but the following example helps illustrate the basic idea underpinning the Index.

In North Carolina, before state and local taxes are collected the top 1 percent of taxpayers earn an average income that is 97 times larger than the average income of the state’s poorest 20 percent of residents. Our tax system, which is among the 45 regressive tax codes in the nation, only exacerbates this divide. After state and local taxes are collected, the average after-tax income of North Carolina’s top earners stands at 100 times the size of the average after-tax income of the state’s low income residents. This is the predictable result of charging low-income families a 9.5 percent effective tax rate, while asking high-income families to pay just 6.4 percent of their income in tax.

While state tax codes are not a cure-all for economic inequality, well-designed systems can help lessen the problem while steeply regressive systems only make it worse.

NC Budget and Tax Center, race

Low-income taxpayers in NC pay more of their income in state and local taxes each year than the richest taxpayers

A new study released today by the Institute on Taxation and Economic Policy (ITEP) finds that the North Carolina tax system is regarded as the 31st most regressive because low-income taxpayers are asked to pay more in state and local taxes as a share  of their income compared to the rich.

The study, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, analyzes tax systems in all 50 states. The analysis evaluates all major state and local taxes, including personal and corporate income taxes, property taxes, sales and other excise taxes. According to their findings, the lowest-income North Carolinians pay 1.5 times more in taxes as a percent of their income compared to the state’s wealthiest residents. As illustrated below, the lowest 20% of North Carolina taxpayers pay 9.5% in total taxes as a percentage of their income, while the top 1% of North Carolina taxpayers pay 6.4% in total taxes as a percentage of their income.

Source: Institute on Taxation and Economic Policy

The wealthiest North Carolinians continue to benefit most from our growing economy and the state tax code is supercharging those gains. It’s not unreasonable to ask the highest-income residents and corporations to pay a share of state and local taxes that gets closer to the share that taxpayers with poverty-level incomes pay or that seeks to balance what is now an upside down tax code.  It makes certain that those who spend more of their income have more income to spend locally. It is also good for our fiscal position as a state.  It turns out, more progressive rate structures are better able to keep up with a growing economy and thus fund the services and infrastructure that support thriving communities.

Sales taxes play a critical role in the regressive and consequently inequitable nature of the North Carolina tax system. Like most other states, North Carolina relies on sales and excise taxes (30.7% of the 2018-2019 approved budget) as a primary mechanism to raise revenue. However, in North Carolina, sales and excise taxes are the most regressive taxes when compared to income and property taxes. The lowest 20% of North Carolina taxpayers 6.1 percent in sales taxes as a percentage of their income while the top 1 percent pays less than 1 percent in sales taxes as a percentage of their income.

Source: Institute on Taxation and Economic Policy

 Equally important are the racial implications of regressive state and local tax systems. Tax codes worsen the racial wealth divide when they tax low-income people at higher rates than the wealthy, tax income derived from wealth (e.g. capital gains) at a lower rate than income derived from work, and heavily rely on consumption taxes. A recent study on the Tax Cuts and Job Act from ITEP and Prosperity Now report regarding changes to the federal tax code report similar findings— communities are color benefit the least from tax systems that reward the wealthy, who are overwhelmingly White. Moreover, tax cuts in recent years in North Carolina have consolidated the racial wealth divide by delivering the greatest share of net tax cuts to White taxpayers.

State lawmakers have control over how their tax systems are structured. This latest Who Pays data makes clear that our state’s failed tax-cut experiment is maintaining a tax code that privileges the few at the expense of us all.

Martine Aurelien is a Policy Fellow at the Budget and Tax Center, a project of the North Carolina Justice Center. Her work focuses on equitable economic opportunities, tax policy, race equity, and systems level policy solutions. 

NC Budget and Tax Center

Trump tax cuts are the “power tools” of the nation’s racial wealth divide

The federal tax code is one of the most powerful tools that drives the economic outcomes that we seek. Unfortunately, instead of utilizing this “power tool” to help low and middle income earners build wealth, the newly enacted Tax Cut and Jobs Act (TCJA) exacerbates an already massive racial wealth divide by rewarding  existing white wealth over the economic security of households of color, a disparity that reflects longstanding racial economic inequality in the United States. A new report from Prosperity Now and the Institution on Taxation and Economic Policy (ITEP) details the racial implications of TCJA.

Here are the THREE key findings from that analysis:

On average TCJA tax cuts benefit White earners of nearly all income statuses: “Of the $275 billion in tax cuts the TCJA provides to individuals this year, $218 billion (80%) goes to White households. On average, white households will receive $2,020 in cuts, while Latino households will receive $970 and Black households receive $840.”

TCJA tax cuts provide pronounced benefits for top earners who are overwhelmingly White: “Middle class households receive $2.75/day in tax cuts while White households in the top 1% receive $143/day; While 1.2% of White families earn enough to place them among the top 1 percent of earners, just 0.4% of Latino and Black families are members of this group.”

Communities of color, especially Asian households, stand to benefit the least: “Asian households fall in the bottom 20% of income-earning households, who receive just $70 from the Tax Cuts and Jobs Act in a year, or less than $0.20 per day.”

In enacting the Tax Cuts and Jobs Act, Congress has chosen to use this economic power tool to further buttress wealthy White households. Without change, TCJA tax cuts stand to increase the racial wealth divide and make it nearly impossible for households of color to catch up to White wealth.

 

Martine is a State Priorities Policy Fellow at the Budget and Tax Center, a Project of the North Carolina Justice Center. Her work focuses on economic equity and systems level policy change. 

NC Budget and Tax Center

Gov. Cooper proposes bold plan for Hurricane Florence recovery

This week, Governor Cooper released a report detailing the damages the state sustained from Hurricane Florence as well as a plan and recommended budget for rebuilding efforts. The plan recommends a total state commitment of $1.5 billion.

“In September 2018, Hurricane Florence brought high winds, dangerous storm surge and record rainfall that caused historic flooding throughout North Carolina. At its peak, Hurricane Florence was a Category 4 storm as wide as the entire state with winds reaching 140 mph. The storm hovered over North Carolina for six days, inflicting even higher levels of rainfall, storm surge, and flooding than Hurricane Matthew only two years prior. This deadly storm has left a lasting impact on families and neighborhoods across our state, resulting in 40 confirmed fatalities. Property damage and power outages were widespread, cutting power to over a million people and forcing tens of thousands of families to take refuge in emergency shelters. While the impacts of Hurricane Florence were felt across the state, those who live in the southeast bore the brunt of the storm. Twenty-eight counties have been designated by FEMA for federal disaster assistance. An estimated 2.6 million people, or one in four North Carolinians, live in one of the designated counties. Preliminary impact estimates approach $13 billion in damages across the state. This is over two times the $4.8 billion physical and economic cost of Hurricane Matthew in 2016.”

Legislators will return to Raleigh in a Special Session Monday devoted to funding long-term recovery needs for Eastern North Carolina.

Check out the full report HERE