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NC Budget and Tax Center

State policymakers return to Raleigh tomorrow challenged with addressing a budget gap of $335 million for the current fiscal year as a result of a huge forecasted revenue shortfall for the current fiscal year and a Medicaid shortfall. Next year, state policymakers face a budget gap of around $228 million, which could reach as high as $637 million based on higher costs estimated from the personal income tax changes.

In the face of underperforming revenue, today the General Assembly’s Revenue Laws Committee voted favorably to pursue changing an arcane tax policy that would FURTHER reduce annual revenue by $10 million next year, FY 2015, and by more than $23 million for FY 2016.

In pursuit of ultimately shifting to a single sales factor apportionment formula, today the Revenue Laws Committee voted to give greater weight to the sales component in determining the amount of state income taxes paid by corporations. The state’s current tax system uses a formula that considers a corporation’s property, payroll, and sales in North Carolina. The tax change would give two-thirds weight to the sales component.

This tax change would create winners and losers. Around 3,000 corporations would see their taxes decrease under the tax change while around 6,000 corporations would see their taxes increase, according to analysis by the General Assembly’s Fiscal Research Division.

Proponents of this tax change claim that doing so will improve the state’s business climate by making expansion of property and payroll in the state more attractive to businesses. Other states that have adopted an SSF formula based on this premise have not seen this happen, however, and there is no reason to believe that North Carolina will experience a different outcome.

Furthermore, reducing the amount of revenue available for public investment will make the self-imposed budget challenge resulting from the tax plan passed last year worse. And everyone will pay the price because this will require further reductions to investments in educating our children, maintaining our infrastructure and protecting the safety and well-being of North Carolina families—investments that are needed to support a strong economy.

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ICYMI, the lead editorial in the Charlotte Observer is a good one. It explains — much as NC Policy Watch Courts and Law reporter Sharon McCloskey did in this story yesterday — why the claims of legislative leaders of that “legislative immunity” somehow insulates them from disclosing the real reasons behind the voter suppression bill passed last session are completely bogus. After exploring the recent hubbub surrounding the bizarre comments of Senator Bill Rabon in the puppy mill controversy, the editorial puts it this way:

“The legislators say they are protected by ‘legislative immunity,’ which they claim not only shields them from ‘arrest or civil process for what they do in legislative proceedings,’ but also having to reveal the conversations they had during the crafting of that legislation.

Are they right? Read More

NC Budget and Tax Center

This month, taxpayers receiving their paychecks are seeing changes in their take-home pay.  Some will see more, some less since the tax plan passed last year delivers income tax cuts depending on individual taxpayer circumstances.

The benefits from the new tax law will accrue primarily to the wealthiest taxpayers and profitable corporations. In total, the tax plan passed last year reduces revenue by nearly $525 million over the next two years. The foregone investments for our communities that will result from these tax cuts will impact us all.

Consider what could have been done to improve the classroom experience of our students in K-12 public schools if policymakers hadn’t chosen to cut taxes for the wealthy and profitable corporations. These dollars could have been used to provide a package of investments in public education such as:

  • Keeping 1 in 5 teacher assistant jobs in FY15
  • Doubling current funding for textbooks in FY15 Read More
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The following four charts demonstrate why NC Medicaid, far from being “broken” or worthy as a scapegoat for every unpopular budget decision made by the NC General Assembly, is containing costs better than any Medicaid program in the country while helping create better health for North Carolinians.  The letter reproduced after the charts shows how disingenuous the “Medicaid is over budget” claim is by Governor McCrory and legislators.

1.  NC Medicaid cost growth is very low.  Just plotting some simple data from the Kaiser Family Foundation shows that the average annual growth in NC’s Medicaid program has declined for the last twenty years and the program is now growing more slowly than the national average.  Current annual cost growth for Medicaid in NC is actually the lowest in the nation and much lower than the national average:

medicaid growth chart

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Governor Pat McCrory today will reject billions of federal dollars from Obamacare to cover 500,000 more poor people under NC’s Medicaid program.  McCrory says the main reason is that NC Medicaid is “broken.”  But that’s just a talking point borrowed from Governors in states like Louisiana, Alabama and South Carolina.  McCrory should be proud of NC Medicaid, our Community Care program – it’s award-winning and seen as a national model and national leader:

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