NC Budget and Tax Center

Falling Behind in NC, NC Budget and Tax Center, Raising the Bar 2015

A tax plan state Senate leaders presented this week would promote neither shared economic opportunity nor prosperity across North Carolina. Far from it.

The proposal would cost more than $1 billion in annual revenue loss as the tax plan continues down the path of handing out more costly tax cuts to large, profitable corporations at the expense of everyday North Carolinians. This approach won’t restore the state’s economy to a sound footing.

The proposed tax plan does nothing about persistent stagnant wages, an uneven economic recovery in which all gains are going to the wealthiest North Carolinians, and the lack of economic and job growth in many parts of the state. Senate leaders would pay for only a portion of the income tax cuts by having North Carolinians pay more in sales taxes, which hit people making relatively low incomes the hardest. And the state would continue to walk away from its responsibility to make much-needed investments in our public schools, public colleges and universities, repair the state’s eroding infrastructure, and other building blocks of a strong economy.

Key aspects of the Senate tax plan stand out as strong reasons why its adoption would fail to promote broad prosperity.

  • The proposal’s reduction of the personal income tax rate to 5.5 percent from 5.75 percent has no benefits to the state’s economy or its competitiveness. At the cost of much-needed public revenue, the tax rate cut won’t drive significant job creation, motivate businesses or people to locate in North Carolina or encourage local investment. Not only do income tax rates affect these factors negligibly, if at all, North Carolina’s personal income tax rate is already in line with the region’s, falling in the middle among southeast states.
  • While putting a limit on how much in itemized deductions a taxpayer can claim is good policy, using the added revenue this produces to reduce tax rates isn’t. Because this proposal would place all itemized deductions—mortgage interest, charitable contributions, medical expenses, etc.—under the cap, it creates greater equity in the treatment of taxpayers. Capping itemized deductions reduces revenue loss from these deductions and helps address inequities in the tax code, as wealthier taxpayers typically benefit more from deductions.
  • Increasing the standard deduction is a wasteful way to address the problem of too many North Carolinians struggling to make ends meet because it deprives the state of much-needed public resources that could boost public investments that promote economic growth. A better way to help hard-working taxpayers keep more of what they earn is to adopt a strong refundable state EITC to help offset not only income taxes, but sales and property taxes that fall hardest on those with lower incomes.

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NC Budget and Tax Center

Despite the clear need to make investments that will put North Carolina on sounder economic footing, the Senate is proposing another round of tax cuts that will hinder the state’s progress, including more income tax cuts and tax breaks for certain businesses. This is a strategy that has failed in many other states.

Now is a critical moment in the economic recovery, and we must leverage this moment to reposition the state’s economy to work for everyone. But this requires that lawmakers raise enough revenues to ensure a quality education for every child, support an efficient and impartial judicial system and provide for the health and safety of all North Carolinians.

If the Senate continues to pursue tax cuts above reinvestment, it will compromise our quality of life and competitiveness now and in the future.

NC Budget and Tax Center

Women will join together at the Bicentennial Mall (near the state legislature) at 5pm today to demand better public policies that would improve the lives of women and families. The rally is part of the North Carolina NAACP’s Moral Monday Movement Summer of Moral Resistance, with support from women’s coalitions such as NC Women United.moralwednesday

Speakers will lift up the fallout from Governor McCrory’s and the state legislature’s policies that have been to the detriment—not the benefit—of Tar Heel women. These policy decisions include the underfunding of education from early education and care to college, shifting taxes away from the wealthy and onto everyone else, failing to expand Medicaid, refusing to give workers the dignity of a minimum wage increase, and enacting the nation’s worst voter suppression law.

Just on the economy issue alone it is easy to see why women will show up tonight and use their voices for change. Women have made tremendous economic strides over the last few decades. Yet, women are still more likely than men to live paycheck to paycheck and struggle to pay the bills.

The fact that women face more economic hardships than men is well-documented in the data. Here are some quick facts from my latest poverty report, North Carolina’s Greatest Challenge, that put Tar Heel women’s economic struggle into perspective:

  • The poverty rate for women in the state was 19.3 percent in 2013 compared to 16.4 percent for men. That year, Tar Heel women earned just 82.9 cents for every dollar men earned.
  • Nearly 156,500 women in the state would have to be lifted out of poverty for women to have the same poverty rate as men.
  • Women of color face particularly high rates of poverty. In 2013, Latina, American Indian, and African American women were more than twice as likely to live in poverty as Asian and white women.
  • Three in four children who were poor lived in families with at least one worker.
  • Gender inequality extends into retirement age too: older female adults are far more likely to struggle to make ends meet than men.

Put simply, from Murphy to Manteo the economy is just downright broken for many women and their families. North Carolina needs policies that create equal opportunity and ensure that prosperity is broadly shared so that all North Carolinians can reach their potential. Yet, the policies that lawmakers are prioritizing are not aligned with the research and fail to meet this standard. Women and allies will join forces tonight to demand better choices to help ensure a better future for us all.

Your silence will not protect you—as Audre Lorde declared. Details are here if you want to join them.

NC Budget and Tax Center

Last week, Stephen Moore, an associate of Arthur Laffer and national consultant, penned an opinion piece in the Wall Street Journal making a claim totally unsupported by facts – that tax cuts are improving North Carolina’s economy.

Tax cuts that primarily benefit the wealthiest people and large, profitable corporations, coupled with the drastic reduction in the effectiveness of unemployment insurance to help those struggling to get by have not ushered in a stronger economy. Instead, North Carolina continues to experience a slow, uneven economic recovery buoyed only by national trends as the state backs away from the kinds of investments that are crucial to growth.

There is no link between the tax cuts and the revenue increase the state is experiencing this year. Instead, pundits like Stephen Moore and others in North Carolina, take simultaneously occurring conditions and claim a connection that doesn’t exist.  This would be like someone looking at the relationship between per capita cheese consumption and civil engineer doctorate awards and declaring that everyone should eat more cheese so we can produce more civil engineers.

What’s really happening is that state revenue is coming in above expectations because of the realization of capital gains and business income growth. It’s the same thing being seen in states that haven’t cut taxes (and one—California—that has actually raised taxes).BTC Job Growth from Recession Watch

Higher job growth rates and productivity are welcome signs in North Carolina. But it’s important to keep in mind our state’s economic performance is still below historic levels.  Take the change in employment, North Carolina’s job growth since the start of the last recession is well below where it should be relative to other similar time periods and that means we continue to struggle to repair the damage of the Great Recession.

Rather than helping the state’s economy, it’s becoming even clearer that the tax cuts hamper our ability to address the real challenges in our economy. For one thing, all income growth since the start of the recovery has gone to the top 1 percent of North Carolinians – those making more than $1 million a year. Average North Carolinians have seen their wages fall despite the official recovery. The jobs being created since the recovery are overwhelmingly work that pays too little to support a family and build a future. And, two thirds of the state’s counties have fewer people employed than before the Recession started.

Contrary to Stephen Moore’s hopes, there is no payoff from tax cuts in North Carolina. Instead, the state will struggle to rebuild and too many North Carolinians will struggle to get by because policymakers failed to realize that tax cuts are not an economic development strategy worthy of our state’s people and history.

NC Budget and Tax Center

This post is authored by Chris Hoene, Executive Director of the California Budget  & Policy Center. 

In November 2012, California voters approved Proposition 30, a constitutional amendment that increases personal income tax rates on very-high-income Californians through 2018 and raises the state’s sales tax rate by one-quarter cent through 2016. Governor Jerry Brown championed and campaigned for Proposition 30 after state policymakers’ made widespread and deep cuts to various state programs and services during and after the Great Recession. Confronted with ongoing state budget shortfalls, and the threat of additional cuts to education and other vital services, the Governor, other state leaders, and a broad coalition — encompassing educators, labor, health care providers, faith organizations, community groups, businesses, and others — backed Proposition 30’s temporary tax increases as a means to stabilizing the budget and ensuring adequate revenues to support public investments that would position the state for economic growth.

What has Proposition 30 meant for California? Since its passage, the state’s General Fund revenues have grown from $93 billion in 2012-13 to a projected $115 billion for 2015-16. This has been driven by a combination of economic growth and Proposition 30’s tax increases, but Proposition 30 alone raises approximately $8 billion for 2014-15 (the current fiscal year) and that figure is expected to be even higher in 2015-16. These new revenues have allowed the state to significantly reinvest in K-12 schools and community colleges. In 2011-12, the low point for state budget after the recession, the state’s commitment to schools and community colleges totaled $47.2 billion. For 2015-16, this commitment is projected to be $68.4 billion. Looking just at K-12 schools, the growth in state spending since 2011-12 amounts to an increase of more than $2,000 per student. California also has slowly begun to reinvest in its state university systems (the California State University and University of California), has created and invested in a new and stronger rainy day fund, and is paying down budgetary debts. Currently, the state is poised to enact its first-ever Earned Income Tax Credit (EITC) in 2015-16, a refundable tax credit targeted to the state’s lowest-income households. Read More