Commentary

Following sharp questioning of Commerce Secretary Skvarla in a Senate Finance Committee hearing Tuesday, it was readily apparent that the Senate would take a different tack on economic development than the House, which passed its own much-criticized package last month. In a surprise press conference yesterday afternoon announcing their own “jobs package” , however, Senate leaders made it abundantly clear that “different” didn’t mean “better” when it comes to growing an economy that benefits everyone in the state. While the bill does take a few positive steps forward on improving our state’s incentive programs, on balance, the bad outweighs the good and does not represent the most effective approach to economic development.

Most importantly, the proposal doubles down on tax cuts and company-specific tax incentives, instead of policies that benefit companies by adding economic value to communities. We’ve known for decades that North Carolina’s competitive edge in the global economy rests on providing companies with the skilled workforce and infrastructure they need boost to their productivity and ensure long-term profitability.

Unfortunately, the proposed changes to the Job Development Investment Grant (JDIG) program ignore these time-tested strategies for robust economic development in favor of budget-busting tax cuts and corporate incentives that have proved more expensive and less effective than advertised. In fact, 60 percent of JDIG projects have failed to live up to their promises of job creation or investment since the program began in 2002, and JDIG is out of money because the state spent more than half the available funds on a single project in Charlotte.

At a time when North Carolina needs to create at least 400,000 new jobs just to meet the needs of growing population, now is not the time to double down on ineffective economic development.

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State lawmakers constantly claim that they are looking out for average North Carolinians. However, actions speak louder than words and proposed tax changes that the state Senate aims to enact is a good example. The tax changes would further shift the tax responsibility to low- and middle-income taxpayers and away from the wealthy and profitable corporations.

As part of the proposed tax changes, the Senate would target cash-strapped homeowners by requiring them to pay state income tax on mortgage debt forgiven by lenders, even though no actual cash is provided to the homeowners. Another proposed tax provision would no longer allow students and families to deduct expenses for tuition and related expenses such as course textbooks, supplies, and equipment.

These two proposed tax changes were excluded from the House version of the bill; however, the Senate has not budged and has kept these tax changes in its package of proposed tax law changes. Consequently, while many North Carolinians continue to await their Carolina Comeback amid an uneven recovery and a steady increase in the cost of a college education, state policymakers are essentially saying “tough luck”.

In contrast, the same Senate bill includes a tax break for businesses that fall on bad luck. The proposed tax change would allow businesses that experience economic losses (e.g. they don’t make a profit), potentially as far back as 30 years, to carry forward those losses to reduce profits generated in the years ahead. Rather than ensuring that profitable corporations pay their fair share, this tax change does the opposite.

The disturbing reality is that North Carolina’s tax system favors the wealthy and profitable corporations at the expense of average North Carolinians. Whereas distressed North Carolina homeowners who were preyed upon by unethical lenders are punished as a result of receiving much-needed consumer relief, profitable corporations are provided tax breaks in the event they fall on hard times.

Such tax changes contribute to the making of North Carolina’s upside-down tax system, which work to shift the tax responsibility to low- and middle-income taxpayers and away from the wealthy and profitable corporations.

Commentary

The warped ideological prism through which the leaders of the North Carolina Senate view reality continues to give rise to new and maddeningly counterproductive policy proposals. The latest came yesterday afternoon when, fresh off of wrecking the state revenue picture for years and handicapping core services like education, the courts and environmental protection with the regressive 2013 tax package, senators proposed another round of corporate tax cuts.

As Alexandra Sirota of the Budget and Tax Center explained it rather politely last night, this is the absolute last thing North Carolina needs right now:

“The corporate tax cuts in the Senate’s proposal would further reduce revenue for investments in our public schools and universities and other building blocks that help drive the success of businesses. Businesses need an educated workforce and modern infrastructure to be successful. Cuts to the tax rates for profitable corporations or changes to the way corporate income is considered for purposes of taxation also won’t address falling wages for the average North Carolinian. Furthermore, the Senate proposal changes to taxes paid by profitable multi-state corporations would not guarantee reinvest in our state and be at the expense of small, home-grown North Carolina businesses.”

In other (and less gracious words), the Senate’s unrequited love affair with trickledown economics continues and will, if unchecked, continue to spur North Carolina’s ongoing and destructive spiral back down into the realm of its backward neighbors like Tennessee, South Carolina, Alabama and Mississippi.

 

Commentary

#ConfirmLoretta2The Charlotte Observer is the latest large media outlet to speak out against the absurd and offensive blockade Attorney General nominee and North Carolina native Loretta Lynch by GOP senators.

The Observer rightfully terms the blockade — which is even opposed by notorious left-wingers like Orrin Hatch, Lindsay Graham and Rudolph Giuliani — a “ridiculous” exercise in toxic politics and political hostage taking.

As this morning’s editorial notes:

“Critics say she’s too much like Holder and the man who’s trying to hire her, Barack Obama, on major issues such as voting rights and immigration. It’s a ridiculous objection. What boss picks an employee to fight his or her goals?

What’s really holding her up is the kind of hyper-partisan D.C. food fight that’s destroying our country.”

Meanwhile, Burr and Tillis are their usual helpful selves:

“Lynch can’t even turn to her two home-state senators for help. A delegation of her N.C. supporters came away disappointed Tuesday after meetings with Richard Burr and Thom Tillis.

Burr has said he can’t support her because she seems too friendly to federal lawsuits like the one pending against North Carolina’s tough new voting requirements. Too much like Holder, Tillis has said, adding that he’d be shocked if her views on key issues differed from the president’s.”

Happily, the saving grace in all this is that Holder remains on the job. As Talking Points Memo reported yesterday:

News

Governor Pat McCrory says he is in “strong disagreement” with the NC Senate’s new economic development plan. The proposal put forth Wednesday would cut the corporate tax rate and shift how incentives are administered.

The governor told members of the N.C. League of Municipalities that the Senate’s plan “breaks the bank” and would serve only to divide North Carolina.

Specifically the Senate’s jobs bill would lower the corporate income tax to four percent beginning in 2016 and three percent beginning in 2017, making North Carolina’s rate the lowest in the Southeast.

The bill would also limit the state’s incentives money going to Wake, Mecklenburg and Durham counties. The measure  would guarantee projects in North Carolina’s other 97 counties receive more than half of incentives funding going forward.

The director of the NC Budget & Tax Center said the Senate leadership fails in several areas with this proposal:

“The corporate tax cuts in the Senate’s proposal would further reduce revenue for investments in our public schools and universities and other building blocks that help drive the success of businesses,” said Alexandra Sirota of the Budget & Tax Center. “Businesses need an educated workforce and modern infrastructure to be successful. Cuts to the tax rates for profitable corporations or changes to the way corporate income is considered for purposes of taxation also won’t address falling wages for the average North Carolinian. Furthermore, the Senate proposal changes to taxes paid by profitable multi-state corporations would not guarantee reinvest in our state and be at the expense of small, home-grown North Carolina businesses.”

To hear the Gov. McCrory discuss the Senate’s jobs plan, click below. Read more about the Senate proposal here.

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