NC Budget and Tax Center

Four big problems with the NC Senate’s latest tax cut proposal

Senate leaders announced last week that they will file a “Billion Dollar Middle Class Tax Cut Act,” which is misnamed. It will actually continue to deliver the greatest tax breaks to wealthy taxpayers and profitable corporations and drive North Carolina ever closer to a zero income tax. The result will likely be a combination of underfunding needed public services in communities across the state and shifting the tax load to low- and middle-income taxpayers through increased sales and property taxes down the line. Here are four huge problems with the proposal:

1. Another $1 billion less in revenue makes it impossible to budget responsibly

The Senate proposes another $1 billion in tax cuts that will be paid for in cuts to public services. Importantly, the legislature’s Fiscal Research Division has already identified $680 million in immediate budget pressures—growing student enrollment in public schools and universities, health care costs, etc—for the next fiscal year. This does not include the well-documented need for the state to support rebuilding efforts in eastern North Carolina in the aftermath of Hurricane Matthew, nor the stated bipartisan priorities to invest in various unmet needs in the courts, mental health and other public service areas.

2. Eighty percent of the net tax cut since 2013 will have gone to the top 20 percent of taxpayers.

The cumulative change in taxes for North Carolina taxpayers will mean that the majority of the net tax cut since 2013, a full 80 percent, goes to the top 20 percent of taxpayers. If this proposal moves forward, a millionaire in North Carolina will have received an average annual tax cut of $20,000, while only a third of taxpayers who earn less than $20,000 would get anything. Taking all tax changes since 2013 into account, people who earn less than $20,000 would receive an average tax cut of $15 under this proposal.

3. Two-thirds of taxpayers in the bottom 20 percent of taxpayers receive no tax cut.

Senate leaders released misleading figures that seem to imply that some of the state’s counties with the highest poverty rates would see the largest tax cuts, but that’s simply not true. The major tax policies proposed in the Senate plan do not target low-income households or communities. These policies seek to exempt more income from taxation, lower the rate on income that is taxed, and uncap itemized deductions claimed by a very few and wealthy taxpayers. Most importantly, these income tax policies do not address the reality that many low-income taxpayers contribute through sales tax and do not have sufficient income to benefit from increasing the standard deduction or a Child Tax Credit that is not refundable. Fully two-thirds of the taxpayers with income below $20,000 a year will receive no tax cut from the Senate’s proposal.

4. Rural communities will continue to be hurt by the Senate tax cut proposal.

Not only will rural communities continue to be among the hardest hit from the loss of state revenue (many infrastructure, economic development and educational investments made by the state are not possible under current austerity policymaking), most rural North Carolinians would see little to no change in their tax payments. Tax returns reporting adjusted gross income over $100,000 and who are likely therefore to be among those receiving the vast majority of the benefits from the tax changes since 2013 are more concentrated in urban areas according to Internal Revenue Service data. Nearly half of taxpayers in rural counties have income that is too low to see any benefit from the Senate tax plan.

Check back here later for our full analysis of the Senate tax proposal.

NC Budget and Tax Center, Trump Administration

Trump’s budget will not make America great again

Budgets matter, both within government and inside each household across America. Within government, a budget in its most basic form equals policy priority. Yesterday, the White House released its first budget blueprint, also referred to as its skinny budget, and the consensus all around is that the proposed budget will not make America great again.

Instead, Trump’s proposed budget will hurt households and remove the foundational role of many federal programs that support the economy and neighborhood well-being.

The reason Trump’s budget will not make America great again is simple: Trump’s budget makes no attempt to prioritize the allocation of money against various important American needs and priorities in a strategic manner. Instead, the Trump budget blueprint makes it very clear that in order to make America great again it only has to address one policy goal: safety. The budget proposes a $54 billion increase in spending on defense.

The safety and security of America is vital. However, 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. Eroding support to state and local governments, reducing investments in neighborhood well-being and limiting the economic security of Americans will undercut that goal. Read more

NC Budget and Tax Center

Senate proposal is another tax cut for the wealthy and profitable corporations

Senate leaders announced they will continue on the path to ruin for North Carolina by pushing forward another series of income tax rate cuts this year that will primarily benefit the wealthy and profitable corporations.

The proposal unveiled this morning will do nothing to boost the wages of working people nor will it help connect rural communities to opportunity, despite Senators’ claims.

Instead, by lowering the income tax rates on corporate profits and income, the proposal continues to lock in the already significant breaks to the wealthy and profitable corporations.  To date, North Carolina’s millionaires have received an average tax break of $15,000 since 2013 while the state’s poorest households are carrying a heavier tax load.

North Carolina’s profitable corporations contribute the lowest amount in the country to ensuring that the infrastructure, workforce development and education that they benefit from is effective and efficient.  Under this proposal, the state will continue to ask little of large multi-state corporations and underfund the foundations of a strong economy for our state.

The proposed changes to the standard deduction and child tax credit are ineffective to offset the already greater share of income paid in state and local taxes by the lowest income taxpayers in North Carolina. And the resulting pressure on local governments to raise property taxes and on future state lawmakers to raise sales tax to make up the losses from these tax breaks for the wealthy will make it difficult to invest in opportunity for all.

It is important for all North Carolinians to see the full plan of the North Carolina Senate. We must ask what will be eliminated from our communities to pay for these tax breaks.  We must ask who they will ask to pay more.

The proposal passed earlier this week to lock in a low and arbitrary income tax rate that primarily benefits the wealthy is part of the effort to eliminate the income tax entirely and push the tax load onto middle- and low-income taxpayers.  Not only is this not a pathway to prosperity, this is another step backward for North Carolina.

NC Budget and Tax Center

Statement from Budget & Tax Center on Income Tax Amendment

Statement from Alexandra F. Sirota, Director, Budget & Tax Center 

Senate Bill 75 passed off the Senate floor today in a move by state lawmakers that once again limits the possibilities for North Carolina. The bill seeks to make an unnecessary amendment to the state Constitution that will harm North Carolina’s future prosperity and the democratic process. 

The proposal will lock in what is essentially a giveaway to millionaires and likely shift the state’s reliance to the sales tax, while also putting more pressure on local governments to raise property taxes. This has always been a bad idea for North Carolina, and it still is.

By placing a low and arbitrary income tax cap into our state constitution, lawmakers are taking democracy out of the budget process. They are aiming to lock in their desired choices and limit the choices of North Carolinians tomorrow, 10 years from now and 100 years from now.  Under this amendment, lawmakers elected by North Carolina’s future voters will not have the tools to meet our state’s future needs.

This unnecessary bill shows a lack of responsibility for the common good. It will make progress impossible on shared goals such as improving teacher pay, ensuring every child is reading by third grade, and providing health and mental care to North Carolinians who need it. The results will be costly for us all and our state.

NC Budget and Tax Center

Still waiting: Eastern NC needs a greater commitment to rebuild after Matthew

When it comes to helping North Carolinians recovery from the devastating flooding and damage following Hurricane Matthew, North Carolina leaders must commit to a significant investment that ensures communities are made whole and more resilient in the face of future natural disasters and economic downturns too.

After the December legislation that made the first investment of $200.9 million, communities waited for a more ambitious proposal that would move beyond emergency response to focus on rebuilding the region.

The Governor’s budget proposal includes more dollars for the region but remains modest in comparison to the need. The proposed budget dedicates $115 million to address needs in housing, local infrastructure, public assistance, and other recovery efforts.

Legislation will be needed that is comprehensive and reflective of the needs to ensure that Eastern North Carolina is rebuilt to greater resiliency.

Hurricane Matthew was not North Carolina’s first time dealing with major post-hurricane flooding. In 1999, Hurricane Floyd caused what is now considered to be lower levels of flooding and damage throughout the East. Governor Hunt and the General Assembly reacted by allocating $830 million state dollars to ensure a swift and speedy recovery. In 1999, $286 million, more than one-third of the entire effort, was pulled from the state’s Rainy Day Fund.

Yet today, in response to Matthew’s, the General Assembly has been unwilling to use the Rainy Day Fund to help struggling North Carolinians get back on their feet. The investments have been too modest to ensure the Eastern part of the state can thrive. Click To Tweet The total investment in rebuilding from Hurricane Matthew by state leaders doesn’t come close to addressing the estimated $1.5 billion in damages spread throughout the eastern part of the state and represents a fraction of what was invested after Hurricane Floyd.

Gov. Cooper recognizes that the allocations in his budget are just a start. The budget also places $300 million into the Rainy Day Fund to be used once the final “unmet need” is assessed.

The problem, however, is that far too many North Carolinians can no long wait for final assessments to be made. While federal and state dollars slowly trickle in, many people remain living in hotels and out of work. They need help now.

The Governor’s Budget’s plan for Hurricane Matthew Recovery: