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NC Budget and Tax Center

At his Tax Day press conference, Governor McCrory repeated the often-heard claim that the effect of cutting taxes on the state’s economy speaks for itself. Last year’s tax cuts may be speaking, but they’re not telling the story its proponents hoped—for the very good reason that tax cuts are just a poor strategy for promoting business growth and long-term job creation.

Here’s the Governor on Tuesday:

“Businesses are relocating to North Carolina because of the changes we made in our tax code and that speaks for itself.”

This claim does not bear up under serious scrutiny. In fact, decades of evidence support the opposite—taxes don’t drive business location decisions. Rather, the public investments that taxes make possible are the most important factors in determining where companies decide to locate—investments like an educated workforce, infrastructure, strong industry clusters, and proximity to research and development institutions.

So let’s examine the evidence Governor McCrory presented, starting with Lee Controls—a New Jersey-based company that recently relocated to Brunswick County and cited tax reform as one of the major reasons for their move. The company is promising to create just 77 jobs over several years. While creating even one new job moves the state in a positive direction, the fact remains that trying to dig North Carolina out of the job losses from the Great Recession is going to require more employment growth than can be generated by one 70-job project at a time.

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NC Budget and Tax Center

This tax season marks the final year North Carolina taxpayers will file their income taxes under the state’s old tax code. By next year the increased tax load for many North Carolina taxpayers will be apparent as a result of the tax plan passed by state leaders last year.

Today, the Budget & Tax Center released a report that highlights how the tax plan passed last year shifts the responsibility of paying for public investments to middle- and low- income taxpayers while providing generous tax cuts to the wealthy and profitable corporations. The report highlights various elements of the tax plan that fundamentally changes the state’s tax system and, subsequently, who pays taxes in North Carolina.

The tax plan passed last year replaces the existing graduated personal income tax rate structure with a flat tax rate that will largely benefit wealthy taxpayers who will now pay a much lower income tax rate. A number of tax provisions that benefit middle- and low-income families – such as the personal exemption and child and dependent care credit – are eliminated under the tax plan. Read More

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Mitigation costs for 450 ppm

Global mitigation costs for stabilization at a level “likely” to stay below 2°C (3.6°F). Source: IPCC 2014 and www.thinkprogress.org

There’s more compelling evidence today — both around the world and here in North Carolina — of the urgent need to move to world economy off of its addiction to the heroin of fossil fuels. Moreover, as this story from the good people at Think Progress reports, such a shift can occur with only a minor economic hit if we act now.

“The U.N. Intergovernmental Panel on Climate Change (IPCC) has just issued its third of four planned reports. This one is on ‘mitigation’ — ‘human intervention to reduce the sources or enhance the sinks of greenhouse gases.’ Read More

NC Budget and Tax Center

Some underling and troubling trends are revealed in the Fiscal Research Division’s newly released third Quarterly General Fund Revenue Report, which provides an assessment of revenue for the state. Not much has changed since the Division’s second quarterly report. Both reports foreshadow some of the particular challenges of the new tax plan—namely the fact that tax rate reductions for profitable corporations will be big revenue losers for the state.

On net, the General Fund was $12.1 million above the $14.5 billion revenue target for the first-three quarters of the current fiscal year that ends in June 2014. This marks a reduction from the $83 million point-in-time “surplus” that accrued by the end of the second quarter. The gap could shrink even further by the end of the month depending on any volatility in revenue collections post-tax season—a factor dubbed as the “April Surprise.”

Revenue collections were ahead of target by the end of the third quarter largely due to stronger-than-expected performances by the sales tax and the corporate income tax on net. Read More

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Acclaimed economist Dean Baker says it’s quite simple to explain why North Carolina’s jobless rate has fallen over the last year:

“It’s very clear, people dropped out of the labor market,” explained Baker in a recent Raleigh interview.

Baker joined Chris Fitzsimon on NC Policy Watch’s News and Views last week to discuss why the state’s economy continues to falter, and when we are likely to see employers increase their hiring. Baker also noted that North Carolina’s employment growth is below what many other states are experiencing.

Listen to the full radio interview online, and be sure to read Rob Schofield’s Weekly Briefing: Five basic things you should know about the state of the economy.
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