NC Budget and Tax Center

Now we know how much North Carolina CEOs are paid compared to their employees

If you’ve wondered why wages for most working people remain stagnant during a period of record stock market values and corporate profits, a recent article in the Winston-Salem Journal provides some insight. The gap between what CEOs rake in and what the typical workers in their companies are paid has exploded since the 1970s, and new data shows how much of their companies’ success is being captured by corporate leaders.

Thanks to a relatively unheralded provision in the Dodd-Frank Act, corporations are now required to report how much more CEOs at individual companies are paid compared to their typical employee. This requirement sheds important light into the often murky waters of CEO compensation, and what emerges from the gloom is often shocking.

“Even though corporations have received criticism for multi-million-dollar executive payouts from rank-and-file employees, worker advocates and some shareholders, the compensation levels typically boiled the pot for just a few days….

“Analysts and economists say the new CEO pay ratio has the potential to make the issue more of a paycheck and dinner table conversation, or it could just provide another throw-up-your-hands, what-can-you-do round of frustration.”

Pay at our countries’ largest companies has not always been this lopsided. According to analysis by the Economic Policy Institute, the pay gap between CEOs and workers was 20-to-1 in 1960, rose to 89-to-1 by the late 1990s, and surged to 271-to-1 by 2016.

With many CEOs at the helm of companies based in North Carolina receiving hundreds, and in some cases more than a thousand, times what their typical workers receive, it’s small wonder that many working families can’t make ends meet. Hopefully, this newfound transparency will raise awareness of just how unbalanced compensation has become and will incite political and business leaders to take real action to ensure that everyone shares in the benefits of economic growth and quarterly profits.

NC Budget and Tax Center

North Carolina’s tax code isn’t meeting the state’s needs, will continue to fall short

Leaders in the General Assembly responded to the consensus revenue forecast with a promise to continue with the tax cuts that have hampered our states ability to fund classrooms, support rural economic development and strengthen the economy for the long-term.

The tax cuts that are scheduled for January 2019 will reduce annual revenue by $900 million in a full fiscal year.  But because the new tax cuts start in the second half of the second year of the two-year budget, lawmakers were not required to account for roughly $400 million of the annual cost of the tax cuts. Leaders put together a state budget for the second year that only accounts for $521 million in revenue losses from cutting the rate of taxes paid by corporations on their profits to 2.5 percent and further lowering the state’s flat personal income tax rate to 5.25 percent.

Leaders claim that the announcement of an over-collection—a mere 1 .5 percent—of the state budget merits staying the course.  Even with that announcement of dollars above what was expected, however, North Carolina will not have a tax code that keeps up with meeting the needs of a growing population with diverse needs. Read more

NC Budget and Tax Center

U.S. House farm bill spells disaster for millions of North Carolinians

Last week, the House Agricultural Committee released its version of the 2018 farm bill. Chairman Conaway’s proposal would increase hunger and further burden struggling North Carolinians by cutting, and in many cases taking away, food assistance. Its effects will ripple through communities, businesses, and farms across generations.

Rather than helping those in need by providing job training opportunities or ensuring workers earn a living wage, this proposal seeks to take away their food. The effects of these harsh changes will be felt by everyone, including parents raising children, people with disabilities, older workers, low-wage workers, and those unable to find jobs.

  • Given that North Carolina is the 10th hungriest state in the nation, this bill would be particularly devastating for our residents. In 2016, SNAP reached more than 1.5 million North Carolinians, targeting the most vulnerable folks to help ensure older adults, veterans, and children get enough to eat each day. SNAP benefits also help stimulate the state’s economy. More than 9,700 grocers and retailers participate in the program, which pumped $2.2 billion into the economy last year. On average, from 2011 to 2014, SNAP benefits lifted 175,000 North Carolinians – including 81,000 children – out of poverty. Click here to learn more about who’s hungry in your legislative district.
  • This bill strips flexibility from the state and creates barriers to the efficient delivery of services. By restricting categorical eligibility and imposing an untested child support cooperation mandate, this proposal prevents North Carolina from administering SNAP in a way that is most efficient and follows the evidence. Categorical eligibility (CAT EL) is critical in providing food assistance to low-income families with children. Data from the Department of Health and Human Services find that eliminating CAT EL would strip food assistance from 133,000 North Carolinians, including more than 51,000 children.
  • Countless individuals would be at risk of losing food assistance through no fault of their own. There are more jobless workers than there are job opportunities in 87 of North Carolina’s 100 counties. The notion that harsh work requirements would “motivate” jobless workers to find work ignores this fundamental reality. Although North Carolina banned work-requirement waivers for economically depressed counties in 2016, these work requirement provisions would double down on people already struggling to find work and preclude the state from undoing a harmful state law that ignores economic realities. Significantly, it would extend the reach of work requirements to affect parents of children over the age of six and older adults.
  • Funding for new work programs is inadequate and fails to recognize what is needed to get people back to work. Under this proposal, North Carolina will be required to provide employment assistance to every eligible SNAP recipient. While not a bad idea on its own, the proposal only allocates $1 billion for an estimated 3 million participants throughout the nation, amounting to $30 per month per participant.This unfunded mandate at the federal level will be pushed down to North Carolina legislators and leaders to address with resources that have artificially been constrained by tax cuts. Currently, only nine of 100 counties in the state operate SNAP Employment and Training programs. In order to offer meaningful employment and work support, North Carolina would have to invest in a workforce development system that reaches rural communities and provides short-credentials, apprenticeships, subsidized work or on-the-job training. In addition, given the evidence around wrap-around services contribution to supporting employment outcomes, North Carolina would need to make additional commitments to transportation, child care, and affordable housing, among other programs.
Commentary, NC Budget and Tax Center

This simple graph sums up NC’s “tax the poor, feed the rich” tax system

In case you missed it on Monday, the latest edition of Prosperity Watch from the N.C. Budget and Tax Center neatly sums up one the most pernicious aspects of North Carolina’s tax system: its favoritism for the rich.

Tax season comes to a close this week, and Tax Day serves as a good time to reflect on who pays taxes in North Carolina. The income tax is, naturally, at the foremost of our minds, but often ignored as one of the best tools to align our tax code with taxpayers’ ability to contribute to and help build thriving communities.

North Carolina’s adoption of a flat income tax rate – after years of having a graduated income tax rate – has made our tax code more upside down, asking less of those with the highest income. A graduated income tax applies a higher rate on every dollar of income above certain thresholds, while a flat rate delivers a bigger tax cut to the state’s wealthiest taxpayers.

The reduction in the share of their income paid in state and local taxes—through this change as well as others since 2013—means fewer dollars for investments in the pathways that connect people to opportunity such as quality early childhood, K-12 education, and affordable post-secondary education. It also means that middle- and low-income taxpayers continue to pay nearly 10 percent of their income annually in state and local taxes, nearly two times as what is paid by the top 1 percent with average income is $1 million.

This upside down approach to raising the revenue needed for public schools, health, and well-being is also unlikely to perform over time. Without a tax code that aligns with where income growth is happening – concentrated at the top – over time the dollars available for public investments will fall short of what is needed.

 

NC Budget and Tax Center

Reckless tax cuts stop NC from funding regional support for DSS offices

Do you remember Rylan’s LawThe Family/Child Protection & Accountability Act? Last year, state legislators sought to change how the state administers and delivers social services programs, including child welfare services, food assistance, Medicare, Medicaid, and others.  The effort began with a focus primarily on the child welfare system after federal oversight identified many challenges as caseloads climbed and funding fell short.

The Social Services Regional Supervision and Collaboration Working Group has been working to put together a detailed plan on how the regionalization of DSS offices should be implemented, including maps and staffing structures. The proposal focuses on providing regional support—training, coordination– to DSS offices and maintaining the physical presence of offices in communities.

On Tuesday last week, the working group presented the first of two final reports to the Joint Legislative Oversight Committee.

Although support for the proposed plan was strong, there was a common point of contention: there was no plan for how any of the changes would be paid for. Instead, the co-chair said the group would have to take a “wait and see” approach regarding whether they would consider costs as a part of the plan.

Since 2013, the state has lost billions of dollars in revenue due to tax cuts that primarily benefited high-income North Carolinians and corporations.  Those tax cuts will continue next year when additional tax cuts for corporations and individuals will lose $900 million over the next fiscal year.

Prioritizing children’s well-being and families’ economic security means funding those priorities not more tax cuts.

Our state’s reckless commitment to tax cuts has very real consequences when it comes to making the critical investments we all know we need. It means that even when policy makers are able to agree on what we should be doing, we are unable to do so.

Brian Kennedy II is a Public Policy Fellow for the Budget & Tax Center, a project of the North Carolina Justice Center.