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Falling Behind in NC, NC Budget and Tax Center, Raising the Bar 2015

A tax plan state Senate leaders presented this week would promote neither shared economic opportunity nor prosperity across North Carolina. Far from it.

The proposal would cost more than $1 billion in annual revenue loss as the tax plan continues down the path of handing out more costly tax cuts to large, profitable corporations at the expense of everyday North Carolinians. This approach won’t restore the state’s economy to a sound footing.

The proposed tax plan does nothing about persistent stagnant wages, an uneven economic recovery in which all gains are going to the wealthiest North Carolinians, and the lack of economic and job growth in many parts of the state. Senate leaders would pay for only a portion of the income tax cuts by having North Carolinians pay more in sales taxes, which hit people making relatively low incomes the hardest. And the state would continue to walk away from its responsibility to make much-needed investments in our public schools, public colleges and universities, repair the state’s eroding infrastructure, and other building blocks of a strong economy.

Key aspects of the Senate tax plan stand out as strong reasons why its adoption would fail to promote broad prosperity.

  • The proposal’s reduction of the personal income tax rate to 5.5 percent from 5.75 percent has no benefits to the state’s economy or its competitiveness. At the cost of much-needed public revenue, the tax rate cut won’t drive significant job creation, motivate businesses or people to locate in North Carolina or encourage local investment. Not only do income tax rates affect these factors negligibly, if at all, North Carolina’s personal income tax rate is already in line with the region’s, falling in the middle among southeast states.
  • While putting a limit on how much in itemized deductions a taxpayer can claim is good policy, using the added revenue this produces to reduce tax rates isn’t. Because this proposal would place all itemized deductions—mortgage interest, charitable contributions, medical expenses, etc.—under the cap, it creates greater equity in the treatment of taxpayers. Capping itemized deductions reduces revenue loss from these deductions and helps address inequities in the tax code, as wealthier taxpayers typically benefit more from deductions.
  • Increasing the standard deduction is a wasteful way to address the problem of too many North Carolinians struggling to make ends meet because it deprives the state of much-needed public resources that could boost public investments that promote economic growth. A better way to help hard-working taxpayers keep more of what they earn is to adopt a strong refundable state EITC to help offset not only income taxes, but sales and property taxes that fall hardest on those with lower incomes.

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NC Budget and Tax Center

Women will join together at the Bicentennial Mall (near the state legislature) at 5pm today to demand better public policies that would improve the lives of women and families. The rally is part of the North Carolina NAACP’s Moral Monday Movement Summer of Moral Resistance, with support from women’s coalitions such as NC Women United.moralwednesday

Speakers will lift up the fallout from Governor McCrory’s and the state legislature’s policies that have been to the detriment—not the benefit—of Tar Heel women. These policy decisions include the underfunding of education from early education and care to college, shifting taxes away from the wealthy and onto everyone else, failing to expand Medicaid, refusing to give workers the dignity of a minimum wage increase, and enacting the nation’s worst voter suppression law.

Just on the economy issue alone it is easy to see why women will show up tonight and use their voices for change. Women have made tremendous economic strides over the last few decades. Yet, women are still more likely than men to live paycheck to paycheck and struggle to pay the bills.

The fact that women face more economic hardships than men is well-documented in the data. Here are some quick facts from my latest poverty report, North Carolina’s Greatest Challenge, that put Tar Heel women’s economic struggle into perspective:

  • The poverty rate for women in the state was 19.3 percent in 2013 compared to 16.4 percent for men. That year, Tar Heel women earned just 82.9 cents for every dollar men earned.
  • Nearly 156,500 women in the state would have to be lifted out of poverty for women to have the same poverty rate as men.
  • Women of color face particularly high rates of poverty. In 2013, Latina, American Indian, and African American women were more than twice as likely to live in poverty as Asian and white women.
  • Three in four children who were poor lived in families with at least one worker.
  • Gender inequality extends into retirement age too: older female adults are far more likely to struggle to make ends meet than men.

Put simply, from Murphy to Manteo the economy is just downright broken for many women and their families. North Carolina needs policies that create equal opportunity and ensure that prosperity is broadly shared so that all North Carolinians can reach their potential. Yet, the policies that lawmakers are prioritizing are not aligned with the research and fail to meet this standard. Women and allies will join forces tonight to demand better choices to help ensure a better future for us all.

Your silence will not protect you—as Audre Lorde declared. Details are here if you want to join them.

NC Budget and Tax Center

Last week, the North Carolina House of Representatives approved a $22.2 billion state budget plan, which is overall a modest step towards building an economy that works for all North Carolinians. The budget represents a 5-percent increase over current year spending and the highest level of investments since the official economic recovery began in 2009.Yet, the plan still falls short of pre-recession levels of investments, fails to replace years of harmful cuts, and does not reflect all that’s needed to foster inclusive economic growth.

Unfortunately it is now clear—based on newly released spending targets—that the Senate is poised to severely limit spending rather than follow the House’s lead on making modest improvements. Low spending targets may be linked to the Senate leadership’s desire to “significantly” cut income taxes even further—a move that would hinder reinvestment in programs and fail to generate promised economic returns.

The Senate’s low spending targets make plain the shortsightedness of such an approach. For example, investments in public schools would only increase by .013 percent after accounting for enrollment growth. School systems and students would have to go without essentials that support academic achievement and completion, hindering the long-term growth potential of the state.

As the Senate moves forward in the budget process, budget writers should keep and build upon the House’s planned investments in the things that build a more inclusive economy so the state can better position itself to be competitive. Further deep tax cuts hinder lawmakers’ ability to achieve this goal. Below is a list of ten examples of economy-boosting investments and policy changes that the House included in its budget plan. Read More

NC Budget and Tax Center

The budget passed by House members last week makes clear that North Carolina remains hampered by costly decisions made in recent years. Despite modest improvements in some areas of the budget, important public investments that drive the state forward remain well below pre-recession spending levels. The House budget is a reflection of choices and an example of missed opportunities.

Modest funding increases in the House budget are primarily the result of moving the goal post. For example, fully funding enrollment growth for our public schools and providing teachers and state employees a two-percent pay increase are typical budget practices, particularly in budgets crafted during a recovery.

The budget hikes various fees, increases tuition at community colleges, fails to reinstate the state Earned Income Tax Credit, and resorts to cutting funding from certain programs to fund others (e.g., the House reduced funding for textbooks in order to fund other areas of the public education budget).

Rather than address persistent underinvestment and seize opportunities to support a stronger economy, state lawmakers will allow another round of corporate tax cuts to go into effect – reducing annual revenue by $100 million in the first year, $350 million the second year, and more than $500 million in subsequent years.

Revenue lost just from these additional corporate tax cuts, which state leaders seem unwilling to debate, could provide funding for much-needed public services that strengthen our communities and the state’s economy. Read More

NC Budget and Tax Center

This piece was originally featured on Women AdvaNCe’s blog and is cross-posted here.

Working Tar Heel moms are never off the clock. From laboring at the workplace all day to tucking kids in at night, we put in a lot more than a full day’s work. Much of the work is tireless, thankless, and unpaid. But for the paid work, every dollar moms work for is hard earned. These are some of the many reasons why we celebrated moms this week.

Flowers and breakfast were great, but this Mother’s Day we needed to keep our sights on what’s happening in Washington, D.C. Congress can help 750,000 moms right here in North Carolina by making permanent improvements to tax credits that put money back into the pockets of moms who’ve earned it. Without action from Congress, these credits expire at the end of 2017.

The state’s economy is experiencing a boom in low-wage work—a trend that is falling disproportionately hard on women. For more than 21 million working moms across the country, including 763,000 in North Carolina, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) are important tools that help them make ends meet in today’s economy. By offsetting income and sales taxes, these credits boost income, support work, and reduce poverty—especially among children.

Allowing moms to keep more of what they earn also helps keep poverty in check. Read More