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NC Budget and Tax Center

This year marks the 50th anniversary of the start of the War on Poverty and Wednesday, January 8th in particular marks the 50th anniversary of LBJ’s speech in which America’s War on Poverty was declared. National media and political figures have been weighing in on whether the War on Poverty has worked, is a “Mixed Bag”, or has missed the mark. The Budget and Tax Center will be launching a blog series this month which will look in depth into the lasting effects of the War on Poverty, its successes, and the challenges that still lie ahead. We’ll also be doing some must-read myth busting as it relates to income and poverty.

What we do know is that the poverty rate has declined since the War on Poverty was declared, and it has declined even more significantly when supplements such as the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) and the Earned Income Tax Credit (EITC) are factored in. What we also know is that even as productivity of workers has increased, wages have stagnated for middle and low income families and inequality has continued to rise.

The War on Poverty and associated safety net programs, which have been a lifeline for millions of families, have done their job to the extent that we have let them. Going forward it is imperative to make adequate and real investments in the programs that we know work in lifting families out of poverty such as the EITC and SNAP, but also to tackle the broader issue of wage stagnation and inequality by ensuring, among other strategies, that we have a minimum wage that reflects the cost of living in the 21st century, and by taking a long hard look at the racial and class inequity that still plagues our nation and our state.

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When the N.C. General Assembly passed a controversial overhaul to the state’s taxing system last year, the promise out of the mouths of Republican sponsors was that it would put more money back in taxpayers’ pockets.

But that’s not the case, the Associated Press found today in a factcheck its reporters conducted on the state’s new tax plan.

“It’s true that the state’s income tax rate is going down for every taxpayer in 2014,” the news agency wrote in an article published today. “But that does not mean all taxpayers will actually pay less to the state government over the coming year.”

That premise of lower tax bills, which has been echoed and repeated by Republican Gov. Pat McCrory, was scrutinized closely at the time of the bill’s passage and debate, with many calling foul on the claims including Cedric Johnson of the N.C. Justice Center’s Budget and Tax Center.

BTC data on N.C. tax increases under new plan

BTC data on N.C. tax increases under new plan

Johnson, in a report published in August, estimated that the bottom 80 percent of North Carolina residents will pay more in taxes under the new tax plan while needed services were slashed and the wealthiest in the state would see reductions in their tax bill. (Disclosure: N.C. Policy Watch is also a part of the N.C. Justice Center.)

The Associated Press took another look this week at the changes to the state’s tax code for 2014 and agreed that the tax breaks promised by lawmakers would not materialize for many people in the state.

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New from the numbers wonks at the Budget and Tax Center:

Allowing the state Earned Income Tax Credit to expire would harm veterans, active-duty military, a new analysis finds

RALEIGH (July 2, 2013) – About 64,000 veteran and active-duty military families in North Carolina would be impacted by current tax plans, all of which allow the state’s Earned Income Tax Credit to expire. New analysis by the Washington, D.C.-based Center on Budget and Policy Priorities and state-level analysis by the Budget & Tax Center found that tens of thousands of military families in North Carolina would be affected.

The Senate tax plan (HB 998, Fifth edition) being debated later today allows the state Earned Income Tax Credit (EITC) to expire, increasing the tax load on tens of thousands of low-income soldiers, veterans, and their families while the wealthiest taxpayers and profitable corporations get a tax break. Read More

NC Budget and Tax Center

Lawmakers are considering various tax plans that would either convert North Carolina’s personal income tax to a flat rate or phase it out altogether, while making the state more reliant on the sales tax. The result would be a tax shift on the majority of North Carolinians, hitting especially hard those at the bottom of the income ladder.

Legislation already inked into law this session signals that moderate- and low-income working families are not at the top of lawmakers’ list of priorities. In mid-March, the Governor signed a bill to axe North Carolina’s Earned Income Tax Credit (EITC). Unless lawmakers reverse course, nearly 907,000 working families—most of them with children to support—will face a tax increase beginning in tax year 2014. Read More

NC Budget and Tax Center

Elizabeth Malm, an economist with the conservative Tax Foundation, yesterday voiced support for the Earned Income Tax Credit (EITC) at a debate about tax reform in North Carolina, highlighting how out-of-touch North Carolina’s leadership is when it comes to its treatment of working families in tax reform efforts.

The EITC, which goes to families that work but struggle to get by due to low wages and helps them pay for basic necessities, has received backing from politicians of all stripes over the years including President Ronald Reagan. It’s not hard to see why since this modest tax credit reduces child poverty, improves kids’ chances of success as adults, and lessens the need for public assistance.

Ms. Malm’s backing of the EITC stands in stark contrast to the actions of Governor McCrory and legislative leadership, who already gave the OK to reduce the state EITC in tax year 2013 and eliminate the tax credit thereafter. This misguided decision will result in a tax hike on more than 900,000 of North Carolina’s lowest-paid workers and their families. Read More