NC Budget and Tax Center

NC Budget and Tax Center

A recent opinion piece in Forbes Magazine wrongly claims that steps North Carolina took to reduce how much unemployment insurance provides to jobless men and women – and make it harder to collect – are somehow helping North Carolina’s economy.

Nothing could be further from the truth.

The article, written by North Carolina’s rightwing Civitas Institute and one of its business partners, heralds the underreported tax cut bonanza in the unemployment insurance as driving workers into employment and employers to create jobs.

In reality, North Carolina’s overhaul of unemployment insurance devastated a system meant to protect the economy from lower consumer demand that happens when job losses mount through no fault of workers.

As policymakers sought to pay down the debt incurred because of historic job loss during the Great Recession and an insufficient Trust Fund resulting from years of tax cuts, they pursued a lopsided approach. They called on jobless workers to pay far more through cuts to their unemployment insurance payments, reducing the number of weeks they could collect UI, making the system harder to access, and  limiting  job training or workforce development opportunities.

The result:  North Carolina went from being not particularly generous _  the middle of the pack among all states _ to downright stingy, at the bottom.

In the third quarter of 2015 (the latest data available):

  • Just 11% of the state’s unemployed receive unemployment insurance which ranks us last in the country
  • The state’s average weekly benefit was $233.69 — 46th in the country. Average weekly benefit as a percent of average weekly wage was 27 percent — 44th in the country.
  • The average duration for collecting UI was 11.5 weeks – dead last in the country.

Before the changes went into effect, the story wasn’t nearly so bad.  The measures:

  • The state had a 39% of unemployed workers receiving unemployment insurance in the second quarter of 2013 which ranked us 24th
  • The state average weekly benefit was $301.06 –   25th in the country.
  • The state average benefit duration was 15.9 weeks – ranking us 31st.

In 2013, the Tax Foundation, a conservative organization that policymakers often quote, ranked North Carolina’s UI system fifth most favorable to business in the nation. Only Arizona, Oklahoma, Delaware and Louisiana scored higher. That was BEFORE the unemployment insurance changes.

Today, employers contribute to the system just one penny for every $100 of wages paid and the average tax rate of 2.2 percent is below what the US Department of Labor determines to be adequate.

Perhaps most troubling in the arguments of those inclined to ignore economic realities is the suggestion that the system was rife with fraud and was discouraging people from seeking jobs.  The facts are otherwise. Read More

NC Budget and Tax Center, Uncategorized

Last Thursday, members of the Economic Development and Global Engagement Oversight Committee saw evidence that many “business climate” rankings overstate how well North Carolina is actually doing.Abernathy Slide - Rankings and Econ Performance

Respected economic expert Ted Abernathy, formerly the Executive Director of the Southern Growth Policies board and now with Economic Leadership, an economic development and analysis consultancy, briefed the committee on a range of economic dynamics from growing wage gaps between urban and rural North Carolina to factors that influence our competitiveness on the global market.

Abernathy also examined how North Carolina’s economic performance compared with how we fared in several business interest group and media publications. This analysis shows that North Carolina’s economic performance has fallen short of its stature in many of the rankings. As can be seen in the graph, North Carolina is in the top 20% in performance (“Statistical Ranking”), but is a top 5 state in the “Best States” rankings. Our economy is doing better than many states, but not nearly as well as many state rankings would imply. Read More

NC Budget and Tax Center

Today the General Assembly’s Revenue Laws Committee held its first meeting for 2016. The meeting’s agenda included presentations to state lawmakers on the committee from state officials regarding tax changes passed last year as well as proposed tax changes that state leaders would like to pass this year. Also included on the agenda was a presentation from a representative of the Tax Foundation (TF), tax policy research organization that favors tax cuts for profitable corporations and the wealthy, and recently released analysis that fails to acknowledge the cost of such an approach to North Carolina’s ability to fund public schools, infrastructure like roads and water/sewer, state parks or public health initiatives.

Here are three takeaways from today’s meeting.

  • Despite the TF spokesman informing that his organization’s assessment of the impact of tax reform in North Carolina uses hypothetical (a.k.a. made up) taxpayer scenarios, some lawmakers still pointed to these scenarios during the meeting to support their claim that the tax changes benefit all North Carolinians. This is not true. The TF spokesman even acknowledged during his presentation that all NC taxpayers do not come out ahead under tax changes since 2013.

Read More

NC Budget and Tax Center

2016 may be the year that families working in low-wage jobs get the spotlight that they deserve from policymakers. Policymakers and candidates on both sides of the political spectrum are finally discussing economic policies that they purport will improve the lives of people who work hard to provide for their families but struggle to afford the basics.

Several Republican presidential candidates turned their attention to economic hardship and income inequality at the Kemp Forum on Poverty last weekend. In a positive development, one candidate voiced his support for expanding the Earned Income Tax Credit for low-income childless workers so they can keep more of what they earn and make ends meet. Another candidate lifted up the benefit of adopting and expanding state EITCs—advice that is in line with a growing body of research that shows how the credit helps at every stage of life. Both policies would reduce poverty for children and families.

Unfortunately, such endorsements for stronger EITCs are out-of-step with GOP policy choices here in North Carolina, where state lawmakers axed the state credit in 2013—despite the fact that in one in three Tar Heel workers earn poverty-level wages.

While it is welcome news for candidates to pay unprecedented attention to poverty, it is concerning that a good share of the discussion falsely portrayed fundamental truths about poverty trends, the effectiveness of work and income supports (i.e. the safety net), and how the proposals discussed would in reality increase material hardship and poverty. Read More

NC Budget and Tax Center

For some of North Carolina’s poorest adults living on the edge, the New Year is not bringing cheers or hopeful expectations. For these folks, the year kicked off with the return of a policy that could push them further into material and economic hardship regardless of their efforts to find work.

More than 100,000 of the state’s poorest adults face losing federal Supplemental Nutrition Assistance Program (SNAP) benefits this year due to the return of the harsh three-month time limit for childless, non-disabled adults aged 18-49. These adults will lose their food aid after three months if they can’t find a job, job-training program, or volunteer opportunity for 20 hours per week regardless of labor market and economic conditions in their community.

Last summer, state lawmakers elected to re-implement the time limit statewide even though parts of North Carolina qualify for a waiver this year due to sustained high levels of unemployment. The time limit would have returned this month for 23 of the state’s 100 counties regardless of state action because of an improving economy in those counties. The remaining 77 counties qualified for a year-long waiver but the governor and legislature permanently banned state waivers after July 2016. Read More