Tag: economy

Georgia’s failed tax reform effort holds a warning for North Carolina

May 9, 2013 at 1:06 pmCategory:NC Budget and Tax Center | Uncategorized

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This is the first of a four-part blog series presenting voices from other states that have unsuccessfully pursued versions of comprehensive tax “reform.”

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Commentary provided by Alan Essig, Executive Director of the Georgia Budget and Policy Institute in Atlanta, GA.

As North Carolina considers major tax reform, it’s useful to take a look at a similar effort in Georgia a few years ago, because what started out as a plan to overhaul the state’s tax system in a responsible way that preserved important state investments quickly devolved into a proposal that put ideology and politics above the welfare of Georgians.

The core of Georgia’s problem was similar to what you are now seeing in North Carolina: the pursuit of drastic income tax cuts paired with a failure to replace this with another revenue source makes it impossible for a state to provide the services that people and businesses depend on every day, like roads, schools, and safe communities. Georgia wisely chose to reject such a proposal in 2011, just as North Carolina should this year. Read More…

Eliminating estate tax provides tax cut to North Carolina’s wealthiest individuals

May 8, 2013 at 4:30 pmCategory:NC Budget and Tax Center

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Comprehensive tax reform remains vague and “short on details” as the 2013 legislative session is beyond its halfway point. Nevertheless, stand-alone bills continue to make their way through the legislative process that would provide tax cuts to the state’s wealthiest individuals. Policymakers have just voted in the House to eliminate the estate tax and both the Senate leadership and the Governor have stated their commitment to do the same.

Proponents of eliminating the estate tax argue that the tax punishes small businesses and small farms in North Carolina. Evidence shows this claim to be false. The estate tax applies to a small number of taxpayers in North Carolina – less than one percent. For tax year 2011, only 23 North Carolina tax filers were subject to the estate tax, according to the North Carolina Department of Revenue. The reality is that the overwhelming majority of small businesses and small farms will not a pay an estate tax while heirs of the wealthiest estates in the state will. Read More…

Another key justification for tax cuts bites the dust: NC economy is already competitive with neighboring states

May 8, 2013 at 10:36 amCategory:NC Budget and Tax Center

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Throughout the ongoing tax reform debate, we’ve been hearing the same tired claims that North Carolina’s economy is failing to compete with our neighboring states. And during yesterday’s preview of the Senate tax reform plan, we heard it again as justification for a billion dollar tax cut.

There’s just one problem—these claims are simply not true. 

As a report released last week found, it’s clear that North Carolina’s economy is performing competitively with surrounding states across every major indicator of economic health, with the exception of the unemployment rate. 

And North Carolina has higher unemployment than neighboring states today because the Tarheel State has historically relied to greater extent on a handful of manufacturing industries that have proved much more vulnerable to offshoring, outsourcing, and global cost pressures.  In 2000, more than 16 percent of North Carolina’s employment was concentrated in manufacturing, the most of any surrounding states. North Carolina lost almost 42 percent of its manufacturing employment between 2000 and 2011, greater than the loss experienced by any other neighboring state.

In fact, if North Carolina’s share of total employment in durable and non-durable goods manufacturing had resembled that of the nation as a whole, the Tarheel State would have 108,000 more jobs today than currently exist, and the state’s unemployment rate would likely be similar to neighboring states.

As a result, North Carolina’s unemployment problem is due to declining competitiveness in specific industries—not to lack of competitiveness in the overall business climate or tax policy. Faced with these very specific challenges, investing in job training and infrastructure to attract and grow the competitive industries of the future is a far better approach to reducing unemployment than the tax cuts currently discussed by the legislature.

U.S. Senate bill would require online retailers to collect sales taxes

May 6, 2013 at 2:19 pmCategory:NC Budget and Tax Center

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Today the United States Senate is scheduled to debate and possibly vote on a bill titled the Marketplace Fairness Act of 2013, which would authorize states to require businesses to collect state and local taxes for products sold via the internet. Currently, states can only require retailers to collect sales taxes if a respective business has a physical presence in a state. And while the tax is still legally due to the state regardless of whether sales occur on-line, consumers don’t always know or comply with this requirement.  

As internet sales have steadily grown as a share of total retail sales, state and local government sales tax collections have been impacted. For 2012, internet sales in the U.S. totaled $226 billion, an increase of nearly 16 percent compared to 2011, according to estimates by the U.S. Department of Commerce. Read More…

Industry vulnerability, not tax policy, explains North Carolina’s high unemployment

April 30, 2013 at 11:24 amCategory:NC Budget and Tax Center

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A new report from the Budget and Tax Center explodes two persistent myths about North Carolina’s economy that are often used to justify cutting taxes. First, the report dispenses with the false claim that North Carolina’s overall economy is uncompetitive compared to our neighboring states. Turns out that our state is leading or in the middle of the pack in every major indicator of economic health—except for the unemployment rate.

Leaving aside Virginia—an anomaly in the South due to the rapid, federally-fueled growth of its DC suburbs—North Carolina has the lowest poverty rate in the region, median household income second only to Georgia’s, and annual per capita economic growth second only to Tennessee’s over the past decade. That last measure probably would have topped Tennessee’s if not for North Carolina’s rapid population growth—the Tarheel State saw an 18 percent jump  in population between 2000 and 2011 (the sixth highest in the nation), while Tennessee had  11.6 percent growth over the same period. Even North Carolina’s loss in household income over the past ten years—while undoubtedly troubling—is not out of line with the losses in other states. 

This means we face an unemployment challenge, as opposed to a more deep-seeded problem with the state’s overall competitiveness.

Second, the report delves into the reasons for this challenge and finds that it is due to long-term over-reliance on a set of declining, less competitive manufacturing industries in comparison to surrounding states, and not to uncompetitive tax policies.  Specifically, the report finds, the driver of our state’s higher unemployment is decline in those specific industries that proved the most vulnerable to offshoring, outsourcing, and global competitive pressures—examples include textiles, apparel, and furniture—and happened to employ a larger share of North Carolina’s workers prior to the 2011 and 2007 recessions than were employed in other states.

  Read More…