Archives

Commentary

As the ongoing budget stalemate continues in the General Assembly, the Senate offered up this morning its latest version of the “NC Competes” bill, the mis-named economic development package that will likely do very little to make North Carolina genuinely competitive for private investment and job creation in the global economy. Like previous renditions of the package, today’s proposal just doubles down on tax cuts and corporate subsidy programs that have proven time and again to be ineffective at meaningfully growing our state’s economy. But it largely goes from bad to worse in terms of the state’s discretionary incentive programs.

In general, economic development incentives are not the most effective tool to promote meaningful job creation or widely shared economic prosperity. They tend to influence only a small number of firm location decisions and frequently end up going to the urban, wealthier areas that need incentive dollars the least in order to attract investment. And in North Carolina, the Job Development Investment Grant program—the state’s flagship incentive program—has failed to live up to its promises of job creation and investment in 60 percent of its projects.

The truth is that incentives just don’t play a major role in making our state competitive for business investment. While JDIG may play a role in luring a small number of businesses to the state, the program only accounts for a vanishingly small amount of the total number of businesses, jobs, and investment that come to North Carolina. Since the end of the recession, 95% of the jobs created, 92% of the growth in the number of businesses in the state, and 99% of the state’s GDP growth have occurred *without* investment from JDIG.

So it’s unfortunate that the Senate doubles down on this ineffective approach. Here are few of the most problematic provisions:

Read More

NC Budget and Tax Center

A report released yesterday by ThinkNC First argues that decision makers in Raleigh have walked away from many of the programs that helped to build a middle-class in North Carolina. Authors William Lester and Nichola Lowe of the University of North Carolina review data showing that middle-income jobs have become much harder to find over the last decade. The report ties this disturbing trend to recent policy decisions to underfund state programs that foster industries that create livable wages and ensure that all North Carolinians can access those jobs. The report makes a strong case that state leaders should heed our history and remember how North Carolina became an economic powerhouse in the Southeast in the first place.

The central problem documented in the report is becoming increasingly difficult to ignore. For the second half of the 20th century, North Carolina’s economy generated strong employment growth up a down the wage scale. Since the start of the Great Recession however, most of the job growth has been in either very high or very low paying industries. The labor market hollowed out, as many industries, particularly in manufacturing, saw employment decline. We here are the Budget and Tax Center have been watching this same trend, and its not pretty.

Read More

NC Budget and Tax Center

It is becoming ever clearer that recent tax cuts have not endeared North Carolina to the entire business community. Proponents of the 2013 tax cuts argued that they would create a more competitive and business-friendly climate. Looking at recent business climate rankings, however, undermines this argument in two key ways.

First, multinational corporations already liked North Carolina just fine before the latest tax cuts. Second, the tax cuts have undermined our economic competitiveness in other important areas.

The 2014 Top Competitive States ranking by Site Selection, in which North Carolina is ranked #1, suggests that the tax cuts worked. However, North Carolina has consistently been at or near the top of the Site Selection rankings for a decade, including being #1 in some years prior to the 2013 round of tax changes. This ranking is largely based on the level of private capital investment a state secures, the number of jobs created, and a state’s tax climate – as determined by the conservative Tax Foundation. Essentially, low tax rates and high levels of capital investments – made possible in part due to generous economic incentives provided to corporations by state governments – benefits a state’s performance in this ranking. Read More

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.

Read More

Commentary

morning assembly 1The Second Chance Alliance held its 3rd Biennial Second Chance Lobby Day at the North Carolina General Assembly on Tuesday. More than 200 North Carolinians gathered to share their stories with lawmakers and lobby in support of policies that help people reenter their communities after incarceration.

The Lobby Day kicked off with an assembly featuring law makers and formerly incarcerated North Carolinians. Division of Adult Correction and Juvenile Justice Commissioner David Guice gave the keynote address, and spoke strongly in favor of policies that help people trying to reenter society and maintain productive lives. Umar Mohammed, a community organizer from Durham, shared his personal story about coming out of incarceration as a youth to find that employers were unwilling to hire him due to his record:

“This is not just my story. I have a whole community with the same story. Luckily I came home and was able to find support and mentors. We’re capable and able to do the work. These barriers have to come down. We want to ban the box.”

thank you postcards 1

Lobby Day participants met with their legislators to express their support for a broad policy agenda, including several bills currently under consideration in the legislature:

  • Adequate funding for community-based reentry service systems;
  • Reasonable waiting periods for expunction of non-violent crimes;
  • Expanded access to certificates of relief;
  • Fair use of criminal records for jobseekers;
  • Raising the age for adult prosecution of misdemeanors to 18.

Click here to learn more about the Second Chance Alliance and past reentry legislation.