NC Budget and Tax Center

NC Budget and Tax Center, Raising the Bar 2015

North Carolina can have quality schools, accessible health care, a sound transportation system, affordable housing and safe neighborhoods—all of the things necessary to strengthen the economy and grow a strong middle class. We just have to make the choice to build this infrastructure of opportunity.

In recent years, state policymakers have undercut the effectiveness of our public systems, instead enacting tax cuts that primarily benefit the wealthiest taxpayers and profitable corporations. Because of those tax cuts and a slow economic recovery, the state doesn’t have enough revenue to adequately support the systems that fuel economic growth.

That’s not how it worked in the past. Coming out of previous recessions, North Carolina quickly reversed the cuts made when times were tight and increased investments in roads, schools, and universities that paved the way for an economy that outpaced many other Southern states.

North Carolina has never looked to other states to show us the way forward. On the contrary, other states in the south have always looked to us for leadership and innovative ideas. Our state created a progressive personal income tax in 1921 that made us a leader in state funding for public education at one the time and further established our reputation as the Great Roads State. We created a community college system that was the envy of the nation. And, more recently, our innovative early childhood programs were held up as a national model.

Today, instead of making investments, policymakers are using the tax system and the state budget to bulldoze the infrastructure of opportunity.

As state leaders create the Fiscal Year 2015-2017 biennial budget, we can encourage them to make investments that are proven to grow our economy and promote financial stability for families and the state government. But we have to acknowledge that they can’t make those investments without the necessary revenue.

Over the next few weeks, experts on a range of issues that support stronger communities, families and economies in North Carolina will share their perspectives here. They will speak not just on where state investments have been and what has been lost in recent years, but they will also share proposed solutions for what North Carolina’s leaders could do to achieve the better outcomes we all seek.

We hope that our leaders will consider how we raise the bar in the budget debate not how we race our neighbors to the bottom.

Editor’s note: This is an installment in “Raising the Bar” — a new series of essays and blog posts authored by North Carolina nonprofit leaders highlighting ways in which North Carolina public investments are falling short and where and how they can be improved.

 

NC Budget and Tax Center

For Throwback Thursday, the Senate is relishing in old school ideas.

Case in point, a bill was filed today to further cut income taxes for profitable corporations and continue to reduce the flat income tax rate that benefited the wealthiest taxpayers the first time around. It is an eerily similar approach as the legislation passed in 2013, which is now hurting our state and economy.

Income tax cuts like the one proposed in today’s throwback are not the answer to the state’s economic challenges. Just ask Senator Brown who is working to secure additional sales tax revenue for rural counties that have been hit hard by the 2013 tax changes which ultimately reduced state investments in public schools and economic development. Take a look at the academic research which finds no consensus on tax cuts benefiting the economy through job creation or increased incomes. Or consider the experiences of states’ like Kansas where income tax cuts have not delivered a boost in jobs or wages but have resulted in cuts to core services.

The continued pursuit of income tax cuts will not boost North Carolina’s economy, it only serves to further reduce revenue that pays for services that people rely on each day, like our schools.  Preliminary estimates suggest the cost of this bill would be $1 billion, on top of the nearly $1 billion price tag of the tax changes passed in 2013.

One major beneficiary of these tax cuts will be profitable corporations.  Read More

NC Budget and Tax Center

Food assistance for vulnerable communities would be slashed deeply under budget resolutions that the US House and Senate budget committees approved last week. The cuts would likely increase hunger, thrust more people into poverty, and push families that are poor even deeper into poverty. Considering that North Carolina has the 5th highest level of food insecurity in the nation, the proposals would deliver a huge blow to North Carolinians living paycheck to paycheck and struggling to provide food to their families.

Under the House plan, the SNAP program—formerly known as food stamps—would be block-granted and cut by at least $125 billion, or one-third, between 2021 and 2025, according to experts at the Center on Budget and Policy Priorities (CBPP). There is some flexibility in terms of how states would be able to carry out the deep funding cuts. If states decided to rely solely on benefits cuts, the average SNAP recipient would face a $55 per month cut in food assistance. For a family of 4 that cut is about $200 a month—or worth about one-quarter of a very low-cost meal plan. States could also turn to eligibility cuts and reduce income limits to achieve the cuts. Either way, cuts of this magnitude will bring harm to families, children, and other vulnerable groups.

North Carolina would lose at least $3.8 billion in food aid over those five years. That would force North Carolina policymakers to make some very difficult decisions about whose food assistance to reduce or terminate, impacting many Tar Heel families who already find it difficult to pay the bills and meet their most basic needs. Read More

NC Budget and Tax Center

State lawmakers once again turned their back on hardworking North Carolinians who struggle to support themselves and their families with low wages.

Yesterday, just before the House Finance Committee was scheduled to debate an economic development bill, House Bill 89, the sponsor stripped out a provision that would have reinstated the state Earned Income Tax Credit (EITC), a tax break that helps thousands of North Carolinians who work at low-wage jobs. North Carolina’s EITC expired at the end of 2013 when state lawmakers failed to extend it, and this economic development bill would have been the perfect opportunity to bring it back.

The EITC is widely recognized as one of the most effective anti-poverty tools nationwide, especially for children. Nearly 907,000 North Carolinians claimed the state EITC for tax year 2012, benefiting nearly 1.2 million children and providing a $108 million economic boost to local communities across the state.

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The bill sponsor, Rep. Moore, informed House Finance Committee members that the state EITC provision was excluded from the revised bill in order to increase the chances of the bill gaining bipartisan support among state lawmakers. Read More

NC Budget and Tax Center

After several states including North Carolina challenged the extension of Deferred Action for Childhood Arrivals and the Deferred Action for Parents of Americans a preliminary injunction was issued holding up implementation of these immigration directives with the potential to reach 5 million immigrants without documents nationwide. While the issue is considered in the courts, the delay has real human, fiscal and economic costs.

As the Center for American Progress notes in their analysis:

The Council of Economic Advisers, or CEA, estimates that the November executive action providing deferred action to low-priority individuals will increase the national gross domestic product, or GDP, by nearly $60 billion over the next decade. In the aggregate, CEA estimates that the immigration directives will increase the GDP by $210 billion. As CAP demonstrated in a recent report, payroll tax revenues will increase $22.6 billion in five years and the solvency of the Social Security system will increase by $41 billion over 10 years as workers earn higher wages…State and local economies also stand to benefit immensely from the executive action.

Indeed, there are clear benefits to state and local economies to ensuring that these low-level undocumented immigrants can work and care for their families free from fear of deportation. As we have written about in the past, North Carolina is poised to benefit economically from these policies both through increased labor force participation and tax revenue. Not only are there estimated to be increases in state tax revenue but their participation in local economies as consumers is also important. That is in part why thirty-three mayors have filed an amici brief to urge the courts to lift the injunction: leaders of cities know that immigrants make an important contribution to their vibrancy. Read More