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NC Budget and Tax Center

The latest Who Pays? report released today by the Institute on Taxation and Economic Policy (ITEP) takes a look at the fairness of state tax systems. For North Carolina, the lowest income North Carolinians pay over 70 percent more in state and local taxes as a share of their income compared to the state’s wealthiest residents, the ITEP report highlights.

The lowest 20 percent of North Carolinians – with an average income of $10,700 – pay 9.2 percent of their income in state and local taxes, the study finds, compared to 5.3 percent for the top 1 percent, the average income for this group is $969,100.

North Carolina’s unfair tax system presents both short- and long-term challenges and concerns. The state’s unfair tax system not only contributes to widening income inequality in the short term, but also leaves the state struggling to raise adequate revenue for public investments in the long term, ITEP notes. These realities are already playing out in the North Carolina. As state lawmakers return to Raleigh this week for the 2015 legislative session they face an ongoing revenue shortfall as a result of tax cuts passed in 2013.

North Carolina has moved away from many features that create a fairer tax system. State lawmakers replaced a graduated personal income tax rate structure (meaning the higher one’s income, the higher one’s effective personal income tax rate) with a flat rate that doesn’t take into account a taxpayer’s ability to pay, allowed the state’s Earned Income Tax Credit to expire, expanded the sales tax base, and allowed the corporate income tax rate to be cut from 6.9 to 5 percent and potentially as low as 3 percent.

These changes have resulted in a sizable reduction in revenue, with the state now challenged with funding basic public obligations such as education and healthcare services for the elderly and poor. Returning to a graduated income tax rate structure, reestablishing a state Earned Income Tax Credit, creating a renter’s credit or an enhanced and refundable Child Tax Credit, and stopping further tax cuts that largely benefit the wealthy and profitable corporations are important opportunities to create a fairer state tax code.

A state tax code that works for all North Carolina taxpayers is important for ensuring that economic opportunity and prosperity is broadly shared. The Who Pays? report highlights that there is work to be done to make this a reality.

News

The UNC Board of Governors heard from several top lawmakers Thursday as part of an attempt by the system’s governing board to improve relations with the elected officials that fund them.

So, what advice did they get?

Bring more conservative voices to campuses, keep cutting administrative costs and, when you are asking for more funding, make your case quickly and clearly.

Republican state Reps. John Bell, Tim Moore of Kings Mountain, and Nelson Dollar of Wake County spoke Thursday afternoon with members of the UNC Board of Governor’s public affairs committee.

Dollar, the top budget writer in the House, said in his opening remarks that he and many of his Republican colleagues want to see conservative voices welcomed on the 17 campuses that are part of the UNC system.

“We want to make sure that diversity on campuses means among other things … that more conservative voices have a hearing as well and (are as) welcome at the campuses,” Dollar said.

The conversation Thursday comes as the UNC is preparing its budget requests for the next two years, which the state legislature will take up in its long session beginning in January. Though it avoided significant cuts for this year, public colleges and universities in the state have weathered deep cuts in prior years that trimmed nearly a half-billion dollars in 2011.

Bell, who is finishing his first term, said he hears from constituents and others who think the university system is still too top-heavy.

“Let’s start streamlining some of this bloated administration,” he said, adding that he think there are too many academic centers at various university campuses.

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2015 Fiscal Year State Budget, NC Budget and Tax Center

The 2015 state budget for creating jobs and growing the economy doubles down on the wrong turn taken by the legislature on economic issues over the last year. First it was the decision to continue to last year’s ill-advised tax cuts for the wealthy instead of investing in job training and education—the real building blocks of sustainable economic growth. Then it was the decision to privatize the business recruiting activities of the Department of Commerce—despite evidence from other states these initiatives produce more scandals than jobs—and eliminate regional planning initiatives that helped small communities coordinate their economic development efforts.

And now the state budget completes this trifecta of poor choices for economic development by spending more of our state’s limited resources on programs that are both ineffective at creating jobs and are overwhelmingly targeted to the wealthiest urban areas of the state instead of the more distressed areas in rural North Carolina.

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Falling Behind in NC, NC Budget and Tax Center, Poverty and Income Data 2013, Poverty and Policy Matters

New data released by the US Census highlight the pervasiveness of poverty nationally and in North Carolina. In 2013, one in six North Carolinians lived below the federal poverty rate – less than $24,000 a year for a family of four and  $12,000 a year for an individual. For communities of color, the poverty rate is far worse: 32.5 percent for Latinos, 28.9 percent for American Indians, and 28 percent for African Americans.

These daunting poverty rates highlight that far too many individuals and families across the state face economic hardship. The persistence of poverty has been accompanied by a rise in income inequality, which poses consequential implications for the overall economy and North Carolina’s state economy. The bulk of economic gains from the ongoing economic recovery have flowed to a small group of high-income earners. In the first three years of the economic recovery, the top 1 percent of income earners captured 95 percent of the income gains nationally. Here in North Carolina, income for the top 1 percent of income earners in the state grew by 6.2 percent from 2009 to 2011 while the bottom 99 percent saw their income decline by 2.9 percent. The latest US Census data show that this early post recovery trend is likely to hold. By 2013, the top 20 percent of households in North Carolina captured more than half of all income earned by all households in the state (see graphic below). Read More

NC Budget and Tax Center, Poverty and Income Data 2013

Poverty remained high in North Carolina last year, according to new Census Bureau data released today. The new data highlights that many people have not benefitted from the state’s weak economic recovery and that North Carolina must do more to help struggling people afford basics like decent housing, nutritious food, and reliable child care, and transportation.

One in five North Carolinians lived in poverty in 2013, equating less than $24,000 a year for a family of four. The median annual income in North Carolina adjusted for inflation did not rise between 2012 and 2013 and is lower now compared to 2009 when the official economic recovery began. Yet other sources show that incomes at the top have grown and the gaps between the top and bottom and top and middle have widened.

North Carolina lawmakers have yet to rebuild what was lost during the recession. Throughout the economic recovery, they have either made deep cuts to or provided inadequate investments for early childhood development, public schools, the UNC System, and nonprofits promoting job and business development in the state’s economically distressed areas. These are key services that invest in people’s future and build a strong economy that offers all families the opportunity to thrive. Lawmakers have also dismantled services that help people get back on their feet when they are struggling, including unemployment benefits, job training programs, and the Earned Income Tax Credit that makes work pay and helps parents avoid raising their children in poverty.

The new Census data shows that progress towards eliminating poverty in the state is stuck: Read More