Category: NC Budget and Tax Center

Georgia’s failed tax reform effort holds a warning for North Carolina

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May 9, 2013 at 1:06 pmCategory:NC Budget and Tax Center | Uncategorized

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This is the first of a four-part blog series presenting voices from other states that have unsuccessfully pursued versions of comprehensive tax “reform.”

gbpi

Commentary provided by Alan Essig, Executive Director of the Georgia Budget and Policy Institute in Atlanta, GA.

As North Carolina considers major tax reform, it’s useful to take a look at a similar effort in Georgia a few years ago, because what started out as a plan to overhaul the state’s tax system in a responsible way that preserved important state investments quickly devolved into a proposal that put ideology and politics above the welfare of Georgians.

The core of Georgia’s problem was similar to what you are now seeing in North Carolina: the pursuit of drastic income tax cuts paired with a failure to replace this with another revenue source makes it impossible for a state to provide the services that people and businesses depend on every day, like roads, schools, and safe communities. Georgia wisely chose to reject such a proposal in 2011, just as North Carolina should this year. Read More…

Eliminating estate tax provides tax cut to North Carolina’s wealthiest individuals

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May 8, 2013 at 4:30 pmCategory:NC Budget and Tax Center

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Comprehensive tax reform remains vague and “short on details” as the 2013 legislative session is beyond its halfway point. Nevertheless, stand-alone bills continue to make their way through the legislative process that would provide tax cuts to the state’s wealthiest individuals. Policymakers have just voted in the House to eliminate the estate tax and both the Senate leadership and the Governor have stated their commitment to do the same.

Proponents of eliminating the estate tax argue that the tax punishes small businesses and small farms in North Carolina. Evidence shows this claim to be false. The estate tax applies to a small number of taxpayers in North Carolina – less than one percent. For tax year 2011, only 23 North Carolina tax filers were subject to the estate tax, according to the North Carolina Department of Revenue. The reality is that the overwhelming majority of small businesses and small farms will not a pay an estate tax while heirs of the wealthiest estates in the state will. Read More…

Another key justification for tax cuts bites the dust: NC economy is already competitive with neighboring states

May 8, 2013 at 10:36 amCategory:NC Budget and Tax Center

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Throughout the ongoing tax reform debate, we’ve been hearing the same tired claims that North Carolina’s economy is failing to compete with our neighboring states. And during yesterday’s preview of the Senate tax reform plan, we heard it again as justification for a billion dollar tax cut.

There’s just one problem—these claims are simply not true. 

As a report released last week found, it’s clear that North Carolina’s economy is performing competitively with surrounding states across every major indicator of economic health, with the exception of the unemployment rate. 

And North Carolina has higher unemployment than neighboring states today because the Tarheel State has historically relied to greater extent on a handful of manufacturing industries that have proved much more vulnerable to offshoring, outsourcing, and global cost pressures.  In 2000, more than 16 percent of North Carolina’s employment was concentrated in manufacturing, the most of any surrounding states. North Carolina lost almost 42 percent of its manufacturing employment between 2000 and 2011, greater than the loss experienced by any other neighboring state.

In fact, if North Carolina’s share of total employment in durable and non-durable goods manufacturing had resembled that of the nation as a whole, the Tarheel State would have 108,000 more jobs today than currently exist, and the state’s unemployment rate would likely be similar to neighboring states.

As a result, North Carolina’s unemployment problem is due to declining competitiveness in specific industries—not to lack of competitiveness in the overall business climate or tax policy. Faced with these very specific challenges, investing in job training and infrastructure to attract and grow the competitive industries of the future is a far better approach to reducing unemployment than the tax cuts currently discussed by the legislature.

Earned Income Tax Credit is worth saving according to the Tax Foundation

May 8, 2013 at 9:33 amCategory:NC Budget and Tax Center

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Elizabeth Malm, an economist with the conservative Tax Foundation, yesterday voiced support for the Earned Income Tax Credit (EITC) at a debate about tax reform in North Carolina, highlighting how out-of-touch North Carolina’s leadership is when it comes to its treatment of working families in tax reform efforts.

The EITC, which goes to families that work but struggle to get by due to low wages and helps them pay for basic necessities, has received backing from politicians of all stripes over the years including President Ronald Reagan. It’s not hard to see why since this modest tax credit reduces child poverty, improves kids’ chances of success as adults, and lessens the need for public assistance.

Ms. Malm’s backing of the EITC stands in stark contrast to the actions of Governor McCrory and legislative leadership, who already gave the OK to reduce the state EITC in tax year 2013 and eliminate the tax credit thereafter. This misguided decision will result in a tax hike on more than 900,000 of North Carolina’s lowest-paid workers and their families. Read More…

Jared Bernstein on today’s tax reform debate

May 7, 2013 at 4:40 pmCategory:NC Budget and Tax Center

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Jared Bernstein, former chief economic advisor for Vice President Biden, debated tax reform with Elizaebth Malm of the Tax Foundation today at an event co-hosted by the Budget and Tax Center, the Civitas Institute, and the Institute on Emerging Issues at NC State University.

In a blog post following the event, Bernstein reflected on some of the key themes that came out of the debate, especially the Great Tax Shift proposed by some in the General Assembly that would ask working and low income families to pay more in sales taxes in order to finance income tax cuts for the wealthiest North Carolinians.

Read Bernstein’s blog post here, and watch video of the event here.