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NC Budget and Tax Center, Poverty and Policy Matters

North Carolina has the 10th highest poverty rate in the nation—down from 13th last year—with more than 1 in 4 of its children living below the federal poverty line. Our state also faces widespread income inequality and less economic mobility than the nation and the southeastern region. Rather than pursue a mix of tax and budget policies that boosts economic security for middle-class and low-income families, state lawmakers instead enacted a tax plan that shifts taxes away from the wealthy and towards the bottom 80 percent of taxpayers, on average.

The tax plan drains $525 million in available revenue for public investments over the next two years—a figure that balloons to at least $650 million within five years.

Consider what could have been done to help improve a child’s shot at the American Dream if state lawmakers didn’t choose to cut taxes for the wealthy and profitable corporations. Over the next two years, these dollars could have been used to provide a package of poverty-busting and mobility-lifting investments such as:

  • Eliminating the waiting list for the North Caroline pre-Kindergarten program;
  • Keeping and strengthening the state Earned Income Tax Credit, which helps boost the income of families who work in low-wage jobs;
  • Maintaining the income tax deduction for contributions to North Carolina’s 529 college savings plans (which was eliminated in the tax plan); and
  • Maintaining funding for the 10 nonprofits that promote economic development in economically lagging and distressed communities across the state – these entities include the Institute of Minority Economic Development and its Women’s Business Center

Despite lawmakers’ assertions, academic research simply lacks consensus on whether cutting taxes is an effective strategy for boosting the state’s economy and creating more jobs.  However, an established and growing body of research exists that show the value of public investments, which serve as the building blocks of a strong economy and family economic security. Read More

NC Budget and Tax Center

The hope-filled message behind the American Dream is becoming a nightmare for many families in North Carolina. Due to the widespread income inequality in the state, economic mobility (the ability of people to improve their economic standing) is becoming more difficult for North Carolinians. This translates as well to intergenerational economic mobility, or the ability of children to achieve higher economic status than their parents. While factors such as education attainment, geography and socioeconomic status impact the ability of individuals to get ahead, a recent study by the National Bureau of Economic Research finds that more progressive tax expenditures are positively correlated with higher intergenerational mobility.

Specifically the progressivity of mortgage interest deductions and Earned Income Tax Credits (EITC) each have positive correlations with the ability of children to be more successful than their parents. In addition, the progressivity of state income taxes is also found to be significantly related to higher intergenerational mobility, thus paving the way to true achievement of the American Dream. Read More

Uncategorized

There’s new confirmation today that it’s time, once and for all, for North Carolina politicians to ditch their absurd obsession with being “competitive” with neighboring southeastern states.

According to a new report described here, the Southeast is the nation’s backwater for economic mobility.

“The study — based on millions of anonymous earnings records and being released this week by a team of top academic economists — is the first with enough data to compare upward mobility across metropolitan areas. These comparisons provide some of the most powerful evidence so far about the factors that seem to drive people’s chances of rising beyond the station of their birth, including education, family structure and the economic layout of metropolitan areas.

Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle and large swaths of California and Minnesota.”

NC Budget and Tax Center

Income inequality—the extent to which income is distributed unevenly—is widespread and growing in North Carolina, according to a recent report by the Budget and Tax Center. In a free market economy, a certain level of inequality is to be expected. However, we are experiencing historically high levels of income inequality—levels that are limiting and eroding the equality of opportunity, a core tenet of the American Dream.

Research shows that 42 percent of Americans born into the bottom fifth of the income distribution remain there as adults. This means that one’s financial standing as an adult is largely dependent upon their parents’ financial standing. This is certainly problematic considering 1 in 4 of North Carolina’s children live in poverty. More troubling, the average North Carolinian experiences lower-levels of absolute and upward mobility compared to the average Southeasterner and American. Read More

NC Budget and Tax Center, Uncategorized

Economic mobility, the ability to improve one’s economic standing, is framing policy debates across the nation amidst the current election season. A brief released today by the NC Budget and Tax Center reports that the American Dream is slipping out of reach for many Tar Heels who are facing lower rates of absolute and relative upward mobility compared to Americans on average. North Carolinians are also contending with widespread income inequality, which is correlated with lower rates of economic mobility according to research. Read More