NC Budget and Tax Center

A report by the Tax Foundation, funded by the NC Chamber Foundation, gets it wrong in its assessment of the impact of tax changes made by state lawmakers in recent years. The plethora of charts and figures created by the Tax Foundation fails to detail the important loss of revenue that has hindered the state’s pursuit of important foundation-building for a strong economy—investments in schools, research and development, entrepreneurship and innovation. The assessment also masks the shift in tax responsibility to the majority of North Carolinians and away from the wealthy and profitable corporations.

Proclaiming that the state’s tax climate has leapt from one of the worst to now one of the best largely as a result of tax cuts provides no insight regarding the fiscal and economic health of North Carolina. Just as a good accountant understands that positive business earnings don’t equate to a financially sustainable enterprise, this reality also applies to tax policy and the economy. In fact, the Tax Foundation’s rankings reflect little more than the tax policies they and their corporate funders want to see rather than a robust body of evidence about what economies need to prosper. In fact, the pursuit of low-taxes has not been demonstrated to consistently deliver the economic returns promised.

Below are three notable takeaways from the Tax Foundation’s assessment of tax changes passed by state lawmakers since 2013. Read More

Commentary, News

The latest “Prosperity Watch” update from the folks at the N.C. Budget and Tax Center makes clear that if there is any kind of “Carolina Comeback,” it is pretty much bypassing our small towns:

As of September 2015, 22 of the state’s 25 smaller cities and towns known as micropolitan areas continued to have more unemployed people than before September 2007 just before the Great Recession began.

Persistent high numbers of unemployed are occurring even as the unemployment rate declines.  This rate drop masks the range of challenges in weak labor markets including insufficient job creation to meet the growing population, declining numbers in the labor force and the resulting failure of wages for the average worker to increase.

For the state’s micropolitan areas with elevated numbers of unemployed, 17 also continued to experience a lower number of employed.  Of the three areas where the number of unemployed decline, Mount Airy, Rockingham and Laurinburg, the labor force and number of employed also declined over the period.  This demonstrates that a decline in the number of unemployed alone is not sufficient indication of a healthy labor market.

In order to see improvement in the labor markets of micropolitan areas as well as the state, it is important to look for increases in the number of employed, growth or stability in the labor force AND declines in the number of unemployed.


NC Budget and Tax Center

The September local employment numbers highlight the persistent jobs challenge that North Carolina faces. At a time when local economies across North Carolina continue to experience the realities of an uneven recovery that has yet to return to pre-recession conditions, Governor McCrory will likely sign a bill today that will further negatively impact our state’s workers and families.

The expected signing of HB 318 means that the time limit on food assistance will go into effect  for 77 counties that qualify for a waiver due to weak labor market conditions. This could result in up to 105,000 childless North Carolinians losing food assistance, driving up demand at local pantries and holding back consumer spending in local groceries.

The latest labor market data show just how damaging the timing of HB 318 could be. All but one metropolitan area and the overwhelming majority of North Carolina’s 100 counties still have more people looking for work than before the economic collapse in 2007. This trend highlights the persistent jobs challenge North Carolina faces – more people desire to work than are jobs available to meet this demand for employment.

“There is a persistent narrative when assessing local labor market conditions in North Carolina. The recovery has been uneven and is bypassing a lot of people who live in both rural and urban areas,” said Cedric Johnson, Policy Analyst at the Budget & Tax Center, a project of the NC Justice Center. “In light of the labor market news, it is still clear that there are too few jobs for all who want to work in North Carolina.  Moreover, there are also too few skills training opportunities for those who seek retraining for new careers.”

Key findings from the county data include:

  • Only 22 of North Carolina’s 100 counties have reached the 5 percent threshold for unemployment that many economists view as full employment.
  • The number of people looking for work is still higher in 81 counties than it was before the recession.
  • 65 of North Carolina’s 100 counties have not gotten back to pre-recession levels of employment.
  • 16 counties actually lost jobs over the last year.

Key findings from the metropolitan data include:

  • 8 of North Carolina’s 15 metropolitan areas have added jobs since the start of the Great Recession. However, the number of people looking for work has grown much faster in every metropolitan area except one (Hickory-Lenoir-Morganton) during that period.
  • In 14 of North Carolina’s 15 metropolitan areas, the increase in the number of people looking for work is more than 20 percent higher than pre-recession levels.
  • Hickory-Lenoir-Morganton is the only metro area to experience a decline in labor force (2.8 percent), number of employed workers (2.8), and number of workers looking for work (3 percent) since the start of the Great Recession.
NC Budget and Tax Center

The latest quarterly revenue report by the General Assembly’s Fiscal Research Division (FRD) highlights that tax cuts do not explain the better-than-projected income tax revenue collections for the most recent fiscal year 2015.

According to FRD, two factors likely affected income tax collections for the most recent fiscal year.

  • Corporate taxable profits accelerated as wages remained low and write-offs on losses from the recession dwindled. This pushed collections 21.2% above forecast expectations.
  • Timing in personal income tax collections from changes enacted beginning with the 2014 tax year meant lower monthly withholding revenue – but higher final payments and smaller refunds in April. The forecast didn’t fully capture those dynamics leading to a shortfall the previous fiscal year and a surplus in FY 2014-15.

There’s evidence to support these two points. Corporate profits are at a record high as the economy recovers in part due to a steady increase in productivity. Meanwhile, wages for workers have remained stagnant – an indication that workers have not participated in the economic gains during the ongoing recovery. Furthermore, FRD notes that tax changes in recent years made it difficult to determine the timing of income tax revenue collections, resulting in a projection that was well below actual collections for FY 2014-15. Read More


Apologists in the right-wing think tanks continue to do their best to cherry pick and spin the tale of a “Carolina Comeback.” Pretty soon there will be a release from the folks in one of the Pope-funded groups celebrating that North Carolina has the seventh fastest growth rate among states whose names include two “n’s during months with between seven and nine letters in their name.

But when it comes to the reality on the ground for real people, the data surrounding the North Carolina economy remain extremely sobering. NC Justice Center economist Patrick McHugh explains in this new release:

Unemployment declines sharply across the U.S. but grows in North Carolina

October 20, 2015 — Economic growth has reduced the number of unemployed across the United States, but such growth doesn’t seem to be happening in North Carolina.

September labor market data released this morning showed a 14 percent decline in the number of people looking for work over the last year, while the ranks of the unemployed in North Carolina grew over the same period.

“We’re creating jobs, but it’s not enough to actually get everyone back to work,” said Patrick McHugh, economic analyst with the Budget & Tax Center, a project of the NC Justice Center. “With so many people out of work, there’s less pressure on employers to raise pay, which is part of why wages in North Carolina are falling further behind the nation.” Read More