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.
News

Duke EnergyFor a short time this past week, it looked like Duke Energy’s negotiated plea agreements resolving coal ash-related federal criminal charges might be coming apart.

Under the agreements, as detailed by the company in a February 20 filing with the Securities and Exchange Commission, Duke Energy’s North Carolina subsidiaries would plead guilty to four Clean Water Act misdemeanors related to violations at Duke Energy Progress’ H.F. Lee Steam Electric Plant, Cape Fear Steam Electric Plant and Asheville Steam Electric Generating Plant, and five Act misdemeanors related to violations at Duke Energy Carolinas’ Dan River Steam Station and Riverbend Steam Station.

Together the companies would pay a total of $102 million in fines and penalties and for community service and mitigation expenses and serve five years of probation – during which time they would establish environmental compliance plans subject to the oversight of a court-appointed monitor.

Approval  of the agreements had been set by the United States District Court for the Eastern District of North Carolina for this Thursday, April 16 and, by all appearances  —  at least from the court records — the parties were on pace with that schedule.

Until April 6.

That’s when David Buente, a high profile environmental defense attorney with Sidley & Austin in Washington D.C. appeared as a new attorney on the Duke Energy team.

A day later Duke Energy asked the court for more time, filing motions to continue the April 16 plea and sentencing to a later date.

The reasons for the request remained a mystery, though, as the court had placed the motions under seal.

A new attorney and a request for a delay for undisclosed reasons cast the plea deal in doubt — until this morning, when U.S. District Judge Malcolm Howard entertained Duke Energy’s request in open court.

As it turned out, there was indeed a hitch in consummating the plea deal, though not nearly as dramatic as the build-up appeared.

Duke Energy wanted more time to wrap up administrative negotiations with the U.S. Environmental Protection Agency relating to the companies’ criminal pleas.

Under the principal of “debarment,” entities pleading guilty to a crime can be prohibited from doing business with the government.

In this case, according to Duke Energy, once the involved companies enter guilty pleas the facilities subject to the agreements could be barred from doing future business with the government.

The companies can get around that by persuading the EPA that they’ve satisfied the issues giving rise to the plea agreements and convincing the agency to waive debarment.

The government objected to Duke Energy’s request for more time, saying that the company knew for some time that it had to wrestle with the EPA over the issue.

“What about the lights going out at places like Fort Bragg,” Judge Howard asked – a scenario he alluded to as having been painted in Duke Energy’s motion.

Debarment is prospective only, Assistant U.S. Attorney Banu Rangarajan pointed out, and Fort Bragg’s contract doesn’t expire until September.

Plus, she added, military officials have the authority to override debarment.

In the end, Howard agreed to reset the plea and sentencing hearing for the court’s own reasons, saying that conditions of probation and other details still needed to be finalized.

Practically speaking, debarment might not have any teeth as a possible sanction when it comes to a regulated utility like Duke Energy that operates as a monopoly.

But getting a waiver of debarment was important for Duke Energy customers, spokeswoman Paige Sheehan said after the hearing, pointing out that getting service otherwise would become much more complicated.

“This is about getting certainly for our customers,” she said.

When asked what ultimate impact a ruling on debarment would have on the plea agreement, Sheehan said none.

“We’re not walking away from this agreement.”

Per this order, the court reset the plea and sentencing hearing for 10:00 a.m. on May 14, 2015 at the federal courthouse in Greenville, N.C.

News

Members of the House Education Committee (K-12) debated a bill Tuesday that would eliminate from public schools personal education plans (PEPs) that are intended to provide additional academic supports to students who are at-risk of failing.

“PEPs are just additional paperwork for teachers to have to perform,” said Rep. Bryan Holloway (R-Rockingham), a co-sponsor of HB 237, who also said that teachers just get lost in the ink and are unable to do what they need to help at-risk students.

Rep. Jeffrey Elmore (R-Alleghany, Wilkes), another sponsor of the bill, called the PEP “quite dated” and duplicative of other processes.

The bi-partisan group of House sponsors seeking to eliminate PEPs put forth a committee substitute version of the bill at the start of Tuesday’s meeting. The current legislation up for debate differs from the original proposal in that it seeks to ensure that there are still some academic interventions in place for at-risk students by requiring local school boards to continue to identify at-risk students and direct school improvement teams to consider various transition plans for those students.

Rep. Rick Glazier (D-Cumberland), formerly a supporter of PEPs, explained his position.

“[PEPs] have not been overly successful in most schools,” said Glazier. “We’ve taken away resources, we’ve taken away bodies, so we have a document that’s kind of ‘put it on the shelf and check the list’ and it’s not doing anything.”

Rep. Tricia Cotham (D-Mecklenburg) opposes the move to strike PEPs, saying that they help children on the brink and provide an avenue for parents to get involved and invested in their children’s education.

“What are we doing to the children that need the most help,” said Cotham. “We’re not giving new, extra resources to help these children, we’re not giving more support—so, what are we really doing for them?”

Senator Jerry Tillman (R-Randolph) was the first to move toward eliminating PEPs during this legislative session—he filed a bill to that end last month.

“Personal education plans are just a lot of paperwork for a lot of students who really just don’t need them,” Sen. Tillman told N.C. Policy Watch.

Many teachers are supportive of what they say is an unfunded mandate’s potential demise.

But even as some cheer the possibility of less paperwork, the looming question of how to ensure academic success for struggling, at-risk students remains.

“Teachers are really stretched extremely thin right now,” said North Carolina Justice Center policy analyst Matt Ellinwood at Tuesday’s committee meeting, who acknowledged that it’s important not to overburden teachers with more paperwork.

But to ensure at-risk students are supported, Ellinwood asked lawmakers to consider strengthening the bill to make sure strong academic interventions are provided and parents have a way to get involved in helping their children to avoid failure in school.

For more background on personal education plans, read my story, “Punting on Personal Education Plans?

Commentary

Credit: Candescent Films

On November 23, 2012, 17-year-old Jordan Davis was shot and killed in Jacksonville, Florida, by Michael Dunn, who was subsequently charged with – and eventually convicted of – first-degree murder. The altercation began with music being played too loud in the parking lot of a gas station and ended with the death of a young black man, less than a year after Trayvon Martin died. Soon after his death, Ron Davis received a text from another grieving father, Tracy Martin, a mere five hours south from Jacksonville: “Welcome to a club none of us want to be in.”

Jordan’s story was highlighted at the Full Frame Documentary Festival this past weekend in Durham, and unfortunately, 3 ½ Minutes is as timely as ever. The film covers the circumstances of Jordan’s death and subsequent legal battle – often called the “thug music” trial, since Dunn’s fiancée testified that mere minutes before he shot 10 bullets into the car where Jordan and three of his friends were listening to music, Dunn told her, “I hate that thug music.”

The film documents the case’s long and tumultuous journey through the legal system. The first trial ended in a mistrial last February after the jury convicted Dunn, who is white, of three counts of attempted second-degree murder for firing at the other teenagers in the car but could not agree on the first-degree murder charge. The eventual retrial ended with the jury finding Dunn guilty of first-degree murder on October 1, 2014.

Every year, Full Frame offers dozens of films that reflect both the past and immediate struggles of modern life. In addition to 3 ½ Minutes, this year’s offerings included films highlighting police brutality (Peace Officer); struggles in Mexico, Russia, and North Korea (Western, Cartel Land, Kings of Nowhere, Kingdom of Shadows; The Term; Red Chapel); the environment (Containment, Overburden); autism (How to Dance in Ohio); the human cost of war and the war on terror (Of Men and War, Tell Spring Not to Come This Year, (T)ERROR)… and circus life (The Circus Dynasty).

No film felt quite as timely as 3 ½ Minutes. With new cases of unarmed black men being shot cropping up with alarming consistency, the film’s impact is even greater. Read More

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.