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The Senate Finance Committee is currently debating and will likely vote on the Senate leadership’s new version of the House tax plan passed on Monday evening. This plan is an extremely costly one that provides huge tax cuts to North Carolina’s wealthiest residents and profitable corporations. The fiscal analysis provided with the tax plan shows that more than $1 billion in revenue would be lost each year once the plan is fully implemented. And, the cumulative impact over the next five years is equivalent to one-fifth of today’s budget. This means cuts on top of the drastic cuts enacted over the last several years. Read More

At the Education Appropriations Subcommittee meeting today, the North Carolina House unveiled the education section of their budget bill. While the unfortunate convention of loading the budget with policy changes in the special provisions section is nothing new, the education-related provisions of the House’s budget proposal go exceptionally far.

Most notably, a bill creating a voucher program (HB 944) that would divert $100 million from public to private schools over the next three years is included in its entirety in the House budget’s 97 pages worth of public education special provisions. The controversial and unpopular voucher scheme faced bipartisan opposition when it was narrowly approved by the House Education Committee on May 27th. If this provision remains part of the budget, vouchers could become law in North Carolina without ever being subjected to a standalone vote on the floor of either the House or the Senate.

Here is a sampling of the many education policy changes embedded in the omnibus budget bill:

Students with Disabilities and Limited English Proficient students would be ineligible for North Carolina Pre-Kindergarten:  In spite of the fact that students with disabilities and limited English proficient students benefit most from early educational intervention, both are incomprehensibly removed from the eligibility definition in the Health and Human Services portion of the budget special provisions.  The income eligibility standard that families must meet to participate is also reduced from 75% of the State Median Income (equivalent to about $42,819 for a family of three) to 130% of the federal poverty level ($24,817 for a family of three).

Larger classes, especially in the early grades: Limits on class sizes in grades K-3 are removed, as are overall teaching load limits for teachers in grades 7-12.

No salary increases for teachers with masters degrees: In another hit to North Carolina’s already underpaid teaching force (currently ranked 46th in the nation in teacher compensation and falling fast), new teachers possessing masters degrees would no longer receive any salary supplement.  Currently new teachers receive a supplement of a little over $3,000 if they have a masters, accounting for about a 10% bump in pay.

Older school buses: The House special provisions replace the current law stipulating that school buses must be replaced every 200,000 miles or 20 years with a provision that buses won’t be eligible for replacement until they reach 250,000 miles. Buses operated for less than 150,000 miles are ineligible for replacement regardless of how old they are, and buses less than 15 years old could not be replaced until they reach 300,000 miles.

This is the sixth of a six-part blog series. (See Part 1, Part 2, Part 3, Part 4, and Part 5)

What would the House tax plan mean for North Carolina taxpayers? In this blog series we highlight the experience of sample taxpayers under the House tax plan. In conjunction with a distributional analysis of the tax plan which gives a better picture of the full impact, these fictional but true to life profiles will demonstrate that middle-, fixed- and low-income taxpayers would lose under this plan while the wealthiest will gain.

A few people do win under House tax plan

Janie and Jeff are owners of a successful chain of hardware stores in North Carolina. They are married with two college-aged children and earn about $1 million a year in household income. They live in Raleigh and also enjoy a vacation home in Wilmington.

Under the House tax plan, their tax load would go down by $11,169, or almost 15 percent compared to current tax laws. When they realize what the difference would be in their tax bill, they are pleasantly surprised. They decide that if the plan passes, they will set aside the additional money from the tax cut to boost their retirement savings.

This is the fifth of a six-part blog series. (See Part 1, Part 2, Part 3, and Part 4)

What would the House tax plan mean for North Carolina taxpayers? In this blog series we highlight the experience of sample taxpayers under the House tax plan. In conjunction with a distributional analysis of the tax plan which gives a better picture of the full impact, these fictional but true to life profiles will demonstrate that middle-, fixed- and low-income taxpayers would lose under this plan while the wealthiest will gain. 

How a supposed tax cut can still equal an overall loss

Bob and Sue are married with an infant and toddler. Bob teaches 2nd grade at the local public school and Sue stays at home to take care of their two young children. With Bob’s salary as a teacher, they make about $46,000 a year. They often feel like they’re struggling to afford the necessities and live paycheck to paycheck. They aren’t able to go out to eat or take trips with the kids, but they are able to provide the necessities.

Under the House tax plan, Bob and Sue would see their tax load go down by about $63, or about 2 percent compared to current tax laws. When the couple becomes aware of this slight reduction in their tax load, they aren’t very excited because they have also been following the state budget debate and know that their oldest child, who they thought would be eligible for Pre-K services, would no longer qualify due to budget cuts that would have to be enacted to pay for the tax cuts. Read More

This is the fourth of a six-part blog series. (See Part 1, Part 2, and Part 3)

What would the House tax plan mean for North Carolina taxpayers? In this blog series we highlight the experience of sample taxpayers under the House tax plan. In conjunction with a distributional analysis of the tax plan which gives a better picture of the full impact, these fictional but true to life profiles will demonstrate that middle-, fixed- and low-income taxpayers would lose under this plan while the wealthiest will gain.

House tax plan bad for business

Jim lives in rural North Carolina. He started a business as a sole proprietor a few years ago—an auto repair shop that he operates out of a storage unit in order to keep overhead costs low. Jim, single with no children, earns about $37,000 a year from his auto repair business.

Under the House tax plan, Jim would see the amount of state and local taxes he pays increase by about 38 percent, or $441. When Jim realizes that HB 998 would amount to a tax hike for him, he is confused because the proposal has been framed as a massive tax cut. The House tax plan reduces the amount of pass-through business income that Jim would be able to deduct from his taxable income and would eliminate the deduction in its second year, while under the current system he could deduct all of his income. Also, due to potential budget cuts to rural economic development programs, Jim is told by the local rural economic development organization that it might not be possible to move forward on his loan application if the cuts that are needed to balance out tax cuts in the state budget go through. Jim worries that if he can’t acquire a separate property for his business he will have to continue working on cars out of his storage unit, which limits the amount of business he can take on.