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Jobs ImageAs state lawmakers continue to go about the business of overhauling important aspects of state government “on the fly” with complex, last-minute proposals that receive only superficial review in kangaroo committee meetings — see, for example, the Senate’s latest mad effort to privatize the state’s Medicaid system in the waning days of the 2014 session — here’s something new and unusual: an actual thorough and thoughtful report on a critically important and under-reported subject that’s not just a collection of soundbites.

The report, not surprisingly, comes from the good folks at the N.C Budget and Tax Center and it deals with the unsexy but vital subject of how North Carolina rebuilds its middle class. The central finding: We ain’t gonna’ succeed by trying to do it on the cheap and/or relying upon race-to-the-bottom tax cuts and low-wage jobs. This is from the release that accompanied the report this morning: Read More

In case you’ve missed it, there has been a phenomenal film series going on this summer throughout North Carolina, which concludes this month with screenings of “Inequality for All” in nine cities from July 22nd – July 31st. The Moral Movies film series, which also included showings of American Teacher, American Winter and Freedom Summer, is sponsored by Working Films, NC NAACP, NCAE, Tar Heel Alliance of Classroom Teachers, Democracy NC, NC State AFL-CIO, NC Justice Center and a number of local partners.

The films offer a way for North Carolinians to see informative documentaries on multiple issues such as education, poverty, workers’ rights, voting rights, civil rights and inequality, and discuss their implications in the context of our state’s current policy environment and the continuing march towards social and economic justice. Following each film, attendees are provided opportunities to take action to improve the lives of all North Carolinians through improving investments in education, raising wages for workers, ensuring broader access to voting rights, or decreasing a widening income and wealth gap. Hundreds have attended one or more of the films in the series around the state, which kicked off in April with American Teacher.

The last film in the series, Inequality for All, features Robert Reich – professor, best-selling author, and Clinton cabinet member – as he demonstrates how the widening income gap is having a devastating impact on the American economy. Reich suggests that the massive consolidation of wealth by a precious few threatens the viability of the American workforce and the foundation of democracy itself. The film unfortunately resonates clearly with North Carolina’s experience given that recent legislative developments such as continued underinvestment in education and economic development, a lopsided tax plan giving big breaks to wealthy taxpayers and corporations while increasing taxes on the majority of working families, limitations to living wage policy and inaction to move towards a living wage has contributed to growing inequality.

Don’t miss your last chance to participate in Moral Movies and register to attend a screening near you this month:

Schedule of Screenings:

Winston Salem: Tuesday July 22, 6 p.m. (RSVP)

Green Street United Methodist Church, 639 S Green St, Winston-Salem, NC 27101

Fayetteville: Tuesday July 22, 6 p.m. (RSVP)

The Main Library, 300 Maiden Lane, Fayetteville, NC, 28301

Asheville: Friday July 25, 7 p.m. (RSVP)

Ferguson Auditorium at AB Tech, 340 Victoria Rd. Asheville NC 28801

Greenville: Tuesday July 29, 7 p.m. (RSVP)

Unitarian Universalist Congregation, 131 Oakmont Dr. Greenville, NC 27858

Raleigh: Tuesday, July 29, 7 p.m. (RSVP)

Community UCC, 814 Dixie Trail, Raleigh, NC 27607

Durham: Thursday July 31, 6:30 p.m. (RSVP)

Durham County Public Library Auditorium, 300 N Roxboro St. Durham, NC 27701

Greensboro: Thursday, July 31, 7 p.m. (RSVP)

Central Library Nussbaum Room, 219 N Church St. Greensboro, NC 27405

Wilmington: Thursday, July 31, 7 p.m. (RSVP)

Cameron Art Museum, 3201 S. 17th St. Wilmington, NC 28412

Charlotte: Thursday, July 31, 7 p.m. (RSVP)

Unitarian Universalist Church of Charlotte 234 N Sharon Amity Rd, Charlotte, NC, 28211

 

This is the third post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years. See the other posts here and here.

The Senate Budget proposal makes significant changes to North Carolina’s child care subsidy program, and not in a good way. In fact it kicks some families off the program. Essentially the Senate eliminates many of the best practices in child care subsidy policy, which results in making it more difficult for working families to access child care. The Child Care Subsidy program provides an opportunity for low-income working parents to access affordable and safe child care while they are supporting their family. As many parents know, child care is often the highest monthly expense for a family, with an average annual cost of full-time center care for one child at about $8,500 a year. The high cost of child care prices many low and middle income families out of the market, which could make it difficult for a parent to get and keep a job, or be forced to choose an unsafe care setting.

Enter the child care subsidy program, which currently provides families who earn less than 75% of the state median income (SMI; about 50,000 a year for a family of four) the opportunity to ensure a safe, quality child care setting for their children while they work. For some parents, the current system also provides a sliding scale for co-payments that decreases as the family size increases. While the program is extremely beneficial both in ensuring healthy early childhood development and allowing parents to work and sustain their family, the funding has been inadequate over the years, leaving over 15,000 eligible North Carolina families on a waiting list as of May, 2014, for months and even years. Read about Lex’s story from Western North Carolina whose children languished on the waiting list for over three years.

A magnifying glass is indeed needed to understand how the Senate budget changes the program because it claims to be revenue neutral and to reduce the number of children on the waiting list. So let’s take a look. The Senate changes eligibility for the program from 75% of the SMI to 200% of the Federal Poverty Level ($47,700 for a family of four) for children ages 0-5 years. This means that to qualify to receive subsidies you have to earn less, even though families who earn up to 75% of the SMI still often can’t afford child care. The Senate further reduces eligibility for families with children ages 6-13 years to 133% of the Federal Poverty Level (about $32,000 for a family of four). The sliding scale is also eliminated, meaning that families with larger family sizes, and thus expenses, have to pay the same copay as families with smaller family sizes. Co-payments are also no longer reduced for partial day care. For some families, the changes in co-payment will price them out of the market, meaning parents could lose jobs or kids could go to unsafe care settings.

The Senate’s proposed changes to the child care subsidy program are just another example of robbing Peter to pay Paul. While they may keep the program revenue neutral, they’re kicking families out by changing eligibility and co-pay levels to do it. And the only way they’re reducing the waiting list is by eliminating those families on the waiting list who are eligible at the current levels that will no longer be eligible with a lower income eligibility threshold. They’re also decreasing state dollars by relying on more federal dollars available through block grants. It’s unclear what the associated impact will be to other block grant-funded programs. A better way forward would be to ensure that all North Carolina’s families who can’t afford care (which according to federal standards could be families earning up to 85% SMI) receive help to support their ability to work and their children’s ability to learn in the critical early years.

 

It comes as no surprise to working families that North Carolina’s tax system is fundamentally unfair. Families who make less than $47,000 a year pay, on average, nearly 2 times more of their income in state and local taxes than those making more than $345,000. But taxpayers don’t have to accept this fundamental unfairness. One of the best ways for our state to improve the fairness of its tax structure is through reinstating a refundable Earned Income Tax Credit.

A new report, Improving Tax Fairness with a State Earned Income Tax Credit, by the Institute on Taxation and Economic Policy shows just how effective a refundable Earned Income Tax credit (EITC) can be in counteracting North Carolina’s upside-down tax code.

Twenty-five states and the District of Columbia already have some version of a state EITC. Most state EITCs are based on some percentage of the federal EITC. The federal EITC was introduced in 1975 and provides targeted tax reductions to low-income workers to reward work and boost income. The federal EITC has targeted income limits to restrict eligibility and better support beneficiaries. By all accounts, the federal EITC has been wildly successful, increasing workforce participation and helping 6.5 million Americans escape poverty in 2012, including 3.3 million children.

In the same vein, states should look to the EITC to improve tax fairness.

North Carolina took that important step in 2007 by establishing an EITC at 3 percent of the federal credit which then subsequently increased to 5 percent. The average refundable state EITC is equal to 16 percent of the federal credit. When state lawmakers allowed our state EITC to expire after 2013, North Carolina had a refundable EITC at 4.5% of the federal credit, well below the average. In North Carolina, as in most states, it would take a fairly significant EITC to begin to offset the upside down nature of state tax codes.

As discussed in this report, lawmakers in Raleigh can take immediate steps to address the inherent unfairness in the tax code by reinstating a refundable state EITC. Ultimately, lawmakers should not only reinstate NC’s EITC but work to make it a higher percent of the federal credit. While it would cost revenue to reinstate North Carolina’s EITC, such revenue could be raised by repealing tax breaks that benefit wealthy taxpayers and corporations, which in turn would also improve the fairness of our state’s tax system.

 

The Governor’s budget irresponsibly jeopardizes North Carolina’s future economic prospects.

There are two main reasons: it uses one-time money that won’t be there in years to come, and it makes cuts in key areas that are the building blocks of a strong economy.

Self-inflicted revenue shortfalls resulting from the tax plan enacted last year mean fewer dollars to build a strong foundation for the state’s economy and improve the lives of all North Carolinians. The Governor’s use of one-time money and cuts to key areas, like higher education and health, are shortsighted and harmful to the state’s long-term stability and growth.

The Governor should put forward a responsible plan to pay for his priorities by stopping any further tax cuts from going into effect and urging legislators to re-examine the tax decisions made last year.  Next year’s financial gap has the potential to grow even larger as the costs of personal income tax changes are felt. State policymakers would do well to plan for that impact and its potential devastating effect on families and the state’s economy.