NC Budget and Tax Center

NC Budget and Tax Center

Ahead of Tax Day tomorrow, check out these five fast facts on taxes in North Carolina and remember: taxes make possible the smart investments that can build a stronger economy and vibrant communities across the state.

Dollar Bill BTC graphic-PNote the graphic above reflects only General Fund dollars.

  1. More than half of the North Carolina’s revenue is collected through individual income taxes.
  2. More than half of North Carolina’s revenue invests in K-12 and higher education.
  3. The total taxes paid in the state by profitable corporations as a share of the economy has dropped from 9 percent in 1990 to 6 percent in 2014.
  4. North Carolina’s lowest income taxpayers pay 9.2 percent of their annual income in total state and local taxes while the state’s highest income taxpayers, with average incomes of $1 million, pay just 5.3 percent.
  5. Revenue growth year over year is far below historic levels limiting the ability of the state to support a thriving economy.
Commentary, NC Budget and Tax Center, Raising the Bar 2015

Editor’s note: The following post by Jeremy Sprinkle, communications director at the NC State AFL-CIO, is the latest installment in “Raising the Bar” — a new series of essays and blog posts authored by North Carolina leaders highlighting ways in which North Carolina public investments are falling short and where and how they can be improved. 

No one wants North Carolina to have a strong economy more than its workers, who want to be able to work and to earn enough to support their families. Our state budget includes vital investments in supporting our current and future workforce, for example through workforce development, re-employment support and early childhood education, and our K-12 public school system. We know that making investments in these areas ultimately benefits all workers, families and our economy.

Unfortunately, legislative leadership in North Carolina has not pursued a path of investing in our workers and future workforce, but instead implemented a costly tax plan passed in 2013 that bleeds the state of much needed revenue for workforce development and training and innovative, proven initiatives that would create good-paying jobs in our state. The plan they passed gave big tax cuts mostly to profitable corporations and individuals at the very top of the income scale. Legislators based the pursuit of this strategy on a theory that tax cuts lead to higher job creation. However prior experience and research tells us that tax cuts don’t create jobs and they don’t grow the economy.

The 2013 tax cuts haven’t fixed the labor market despite disproportionately going to so-called “job creators” – the wealthiest North Carolinians and profitable major corporations.

As billionaire venture capitalist Nick Hanauer has said, if it was true that tax cuts for the rich created jobs, we would be drowning in jobs — but we’re not.

There are more people looking for work today than before the recession, and many of the jobs out there are low-wage jobs that don’t pay enough to support families or to reverse the decline of our middle class.

In fact, adjusting for inflation, an hour’s work today actually buys less than it did in 2007. Another tax cut isn’t going to fix that.

The way to raise wages and fix the labor market is by investing in our workforce and by empowering more workers to engage in collective bargaining to turn low-wage jobs into good jobs.

Policymakers have for too long asked working families to pay more and settle for less.

The 2013 tax cuts for the wealthy forced the state to slash programs that would have helped workers recover from the recession and rebuild their lives.

Workforce development, reemployment services, child care subsidies, and the Earned Income Tax Credit have all been cut or eliminated. Meanwhile, the cost of job training at community colleges or of pursuing a higher education is more expensive than ever.

Workers are consumers, and that makes us the real job creators in our economy. There aren’t enough wealthy people to make up for the declining buying power of North Carolina’s workers, and another tax cut for the rich won’t change that.

If lawmakers want to create jobs, they need to invest in workers, and investment takes revenue, revenue that is lost by cutting taxes.

And if they want to do something meaningful to put more money into workers’ pockets, they’d be better off encouraging workers to form unions and bargain collectively than by doubling down on the failed ideology that tax cuts are some sort of cure-all that past experience and common sense tell us just isn’t true.

 

Poverty and Policy Matters

If you work, you deserve to get paid. Sadly, in these times, even that statement is controversial (just see all our wage theft work).

So if it’s hard to even get workers paid, period, it shouldn’t be surprising that there are still opponents to the idea that women deserve equal pay for equal work. Maddening, but not surprising.

Today is Equal Pay Day, and new article from WomenAdvanNCe highlights the all-too-trouble wage gap that still exists. The piece reports on some statistics you’ll have heard (nationally, women make 78 percent of the salary earned by men doing the same job) and some you may not have.

As is often the case, the numbers get most tragic and shocking when broken out by race:

For North Carolina women, the statistics are slightly better. We make 82 cents on the dollar on average, but those numbers plummet for minority women: African American women in North Carolina make 64 cents on the dollar, while Latina North Carolinians make less than half of what men make at 48 cents on the dollar.

Sad and angry about this? You have a right to be. Want a good laugh that makes this same, all-too-salient point? Check this out.

 

Poverty and Policy Matters

There are few situations in life that are clearly win-win. When you see one, you have to take advantage of it.

That’s why North Carolina should reverse course and expand Medicaid. When you have the chance to improve health care for hundreds of thousands of people and actually save money, you should jump on it.

In a recent News & Observer editorial, the paper called the decision not to expand Medicaid “wildly irresponsible and hugely expensive.” That’s precisely correct, and let’s explore the first part of the statement a bit more.

Turning down Medicaid expansion turns down $50 billion in federal funding and prevents roughly 400,000 of our neighbors from getting covered. That makes expanding Medicaid an obvious choice.

But also consider that preventative care saves money over the long run. Insuring people means they get to go to the doctor, which means we pay less to prevent disease. This leads to lower costs for taxpayers and better lives for our people. An excerpt from the N&O piece:

Community Care said in a news release: “The medical costs for low-birth-weight babies average $49,000 in a baby’s first year of life, or more than 10 times more than babies born without complications. A low birth weight also increases a child’s risk for long-term medical and developmental complications and the likelihood of incurring additional expenses for social services and educational needs in later years.”

Kate Berrien, manager of Community Care’s pregnancy project, said North Carolina now leads the South in having the fewest births before 39 weeks. That’s a lot of savings and a vast increase in the quality of life for many children born to low-income mothers. And it’s an achievement attributable to innovations in community-level care that were developed in North Carolina and are being adopted across the nation.

It’s a win-win situation. Tom Wroth, CCNC’s chief medical officer, said, “We’ve been able to align improving clinical quality with lower cost.”

Read that last paragraph again. Improving quality care with lower cost is a win-win. So is expanding Medicaid.

NC Budget and Tax Center, Raising the Bar 2015
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.

We have been highlighting the views of experts about where North Carolina needs to invest to have the maximum impact and will continue to do so throughout the budget debate. The combined potential of smart spending with adequate revenue can improve the state’s economy and ensure more people can contribute to the activities and institutions that make our state great.

There has been very little, however, to suggest that policymakers are willing to tackle the challenge of a tax system that no longer is capable of supporting the core public services that deliver opportunity. Instead, there continue to be proposals to cut the income taxes and shift limited revenue around without addressing the fundamental issue that there are too few dollars.

As we have written about at Prosperity Watch, the state’s revenue is not only coming in far below projections it is growing far below historic averages. The result is that today we don’t have the revenue needed to invest for our future. And in that future we can anticipate ongoing self-inflicted revenue challenges unless policymakers address the inadequacy of our tax code.

North Carolina is not broke. There are the resources to make a commitment together to building that foundation. It will require that the state’s wealthiest residents—who have captured the entirety of income growth since the recovery began—and profitable corporations—who continue to reach record profits—contribute according to their ability. They, like the state, stand to benefit. After all a stronger economy is possible when more Tarheels are educated, more businesses have skilled workers, more main streets have vibrant small businesses and more communities are safe and healthy places to live.

Here are some of the big picture ideas that policymakers should consider in developing a tax system that can achieve our shared goals of strengthening the state’s economy and supporting families and communities across the state.

  1. Restore an income tax rate structure that ensures that all taxpayers carry an appropriate share of the tax load. This could provide $390 million if you keep the current 5.7% rate for the majority of taxpayers and add two brackets for the wealthiest in the state.
  2. Restore a vital tax credit for low-income working families before expanding the sales tax any further.
  3. Make sure that large, profitable corporations are paying to support the services they use and benefit from. This could provide $200 million if the corporate income tax rate is set at 6 percent which is in line with the region.
  4. Eliminate special-interest tax preferences that aren’t helping the state’s economy.

North Carolina has the capacity to make sure that our investments can grow an inclusive and strong economy. Policymakers just need to recognize—as they have done in the sales tax allocation debate—that revenue serves as the mortar in the foundation to supporting a vibrant economy.