NC Budget and Tax Center, Trump Administration

816,000 NC kids would be left out of GOP tax bill’s Child Tax Credit proposal due to low income

House Republican leaders highlight an increase in the maximum value of the federal Child Tax Credit (CTC) as their tax bill’s signature benefit for working families, but the provision completely excludes 354,000 children in North Carolina whose parents work in low-paying jobs, according to a new report from the Washington, DC-based Center on Budget and Policy Priorities. Another 462,000 North Carolinian children in low-income working families would receive less than the full $600 increase in the credit that would be available to higher income families.

Altogether, about 816,000 North Carolinian children in working families would either be excluded entirely or only partially benefit from the increase in the CTC. A larger share of North Carolinian children are excluded or only partially benefit than in the country as a whole.

Nationally, roughly 23 million children would be partially or entirely excluded from the House Republicans’ plan, even as it newly extends the CTC to families with incomes between $150,000 and $294,000. For example, a single mom of two working full time at the minimum wage would get no benefit from the CTC expansion under the House Republican plan while a married couple earning $230,000 would receive a new $3,200 benefit.

Republican Senate leaders have suggested that they may increase the CTC further when they release their tax bill this week. Unless they revise the proposal’s basic structure, however, it would provide far larger benefits to higher income families than to families that face difficulties affording the basics.

Analysis on the Children and Top Working Parent Occupations Affected

Analysis shows that of the roughly 23 million children across America that would be partially or fully excluded from the CTC increase:

  • 8 million are children under the age 6
  • 7 million are Latino children
  • 3 million are white children
  • 6 million are African American children
  • 600,000 are Asian children

According to the report:

“The average income of working families with children that would be partially or entirely left out of the CTC increase is $22,000.  Among these working families, two-thirds include at least one parent who works full time for most of the year.”

Analysis of available data shows that the top occupations of working parents fully or partially left out of CTC proposal in house tax bill are:

  • Office and administrative support
  • Sales
  • Food preparation and serving
  • Building and grounds cleaning and maintenance
  • Construction and extraction
  • Transportation and material moving
  • Manufacturing
  • Personal care and service
  • Health care support

Based on this latest report it is clear that rushing this tax legislation without real debate, without informed analysis, and without input from key stakeholders is not the way our Congress should operate.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

House tax plan is off by over $700 billion, will add more to the U.S deficit than Trump-GOP want to admit

When the House released its Trump-GOP tax bill last week Americans found out that this proposed legislations would increase the U.S. deficit by $1.4 trillion over the next ten years. However, further analysis shows that after accounting for budget gimmicks and interest costs the real additional burden to the U.S. deficit is well over $2 trillion.

In other words, the tax plan that is being touted by President Trump and other congressional leaders is off by over $700 billion.

Here’s a visual that explains the math behind this greater hit to the country’s fiscal position from the tax plan.

The major drivers of the difference in reporting is that major provisions end arbitrarily after just five years, making them look cheaper than they really are, and the cost of interest.

These math problems with the tax plan will face a real challenge in the Senate which is expected to release its version of the tax bill this week. The approach used by the Senate will have to be realistic as the math used by the House does not comply with the “Byrd Rule”. If a bill adds to the federal deficit after a decade, the Senate will not be able to pass a bill through the process known as reconciliation, which allows legislation to pass with only a simple majority of 51 votes.

That our elected officials in Washington continue to propose tax and budget proposals that contain trillion dollar math errors or gimmicks should be worrisome for all Americans. Good policy that is intended to help Americans should not be made up of gimmicks. If Congress is really serious about reforming a tax code that has not seen major changes in over 30 years it needs to ensure that its numbers are right.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

 

NC Budget and Tax Center

House GOP tax plan: Benefit for richest 1% in North Carolina grows over time

A 50-state analysis of the House tax plan released last week reveals that in North Carolina the wealthiest 1 percent of North Carolinians will receive the greatest share of the total tax cut in year one and their share would grow through 2027. Further, the value of the tax cut would decline over time for every income group in North Carolina except the very richest.

House leadership continues to tout this tax proposal, which will increase the federal deficit by $1.5 trillion over the next decade, as a plan to boost the middle class. But a closer examination of the bill’s provisions reveals that it is laser-focused on tax cuts for the nation’s highest earning households. The wealthiest North Carolinians share of NC’s tax cuts would grow over time due to phase-ins of tax cuts that mostly benefit the rich and the eventual elimination or erosion in value of provisions that benefit low- and middle-income taxpayers. For example, after five years, the bill eliminates a $300 non-child dependent credit that benefits low- and middle-income families while fully repealing the estate tax in year six for the very large estate subject to the tax.

More specifically, the 10-year outlook for the plan reveals that by 2027, the top 1 percent of households in North Carolina share of tax cut would increase from 30 percent in year one to 43 percent by 2027, for an average cut of $55,030 in 2027. Middle-income taxpayers’ average tax cut would erode to $660 from $770, and the poorest 20 percent’s average tax cut would decline from $220 to $120.

The bottom line: This tax bill will hurt North Carolina taxpayers in the short- and long-term by primarily benefiting the wealthiest in the state and undermining public investments that serve us all today and in the future.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

 

NC Budget and Tax Center

Statement on the House tax bill from the Director of the Budget & Tax Center

Statement on the House tax bill from Alexandra Sirota, the Director of the Budget & Tax Center, a project of the NC Justice Center:

“In North Carolina, we have seen how this approach to tax cuts plays out. Some people end up paying more, and everyone loses from diminished investment in their community and an economy that fails to get a boost. Federal pursuit of yet another failed tax-cut experiment will make our state challenges even worse by shifting costs to our state and leading to cuts in services. Our federal delegation should step up in this process, urging careful debate of any tax plan and rejection of one that grows the deficit, gives massive tax breaks to the wealthy and forces cuts to programs that build a pathway to the middle class for millions of Americans.”

Click here for more information about the impact of the proposed federal tax changes. 

NC Budget and Tax Center

U.S. defense industry very concerned with Trump-GOP tax plan, which adds to the deficit

House congressional leaders are expected to release their tax plan today, Nov. 2 – a day after it was originally scheduled to come out.

This is the tax bill that President Trump has been promoting and that analysis has shown will primarily benefit the wealthiest 1 percent in America and will cause the U.S. deficit to increase by $1.5 trillion.

As all Americans prepare for Congress to muddy the waters about what this tax bill means here’s a simple formula to keep in mind:

The U.S. defense industry appears to understand the reality of this formula and is now one more group that is very concerned about future federal budgets cuts as the U.S. deficit is increased simply to pay for GOP tax cuts.

Defense News reports that the U.S. defense industry is asking Congress “to avoid adding to the deficit because companies are fearful that higher deficits will encourage cuts to defense spending in the long run.”

The core issue that the defense industry brings up is exactly the same concern various other groups across North Carolina and America have brought up regarding the future budget cuts to Pell Grants and student loans, Medicaid, Medicare, food assistance through SNAP, Social Security Disability Insurance, and housing assistance – just to name a few.

As we stated back in March, when the White House released its first budget blueprint:

“The recipe of what has truly made America great over time has been its ability to prioritize effectively various policies, including security, in order to serve all Americans and provide for a more prosperous future that considers a wide array of current and emerging issues.”

As it relates to the federal budget and the proposed GOP tax plan, the ultimate question for the president and Congress at this time is: Which of the following is more important?

  1. Tax cuts for the wealthiest and most profitable corporations; or
  2. Investing in our security and the building blocks that promote thriving communities in this country

Based on the choices that the president and Congress have made recently, Americans across the country need to make their voices heard now to help them choose the answer that will strengthen our country not hurt it.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.