Commentary, News

Yet another story shines an unflattering light on the NC lottery

LotteryThe Joint Legislative Oversight Committee on the North Carolina State Lottery meets this morning in Raleigh. Let’s hope this new article by reporter Jessi Stone of the Smoky Mountain News (“Little help from the lottery: N.C.’s education games falling short of promises”) is on everyone’s desk. As Stone reports:

Over the last nine years, the lottery has contributed $4 billion to K-12 education —funding school construction, pre-K programs, college scholarships and keeping teachers in the classrooms.

The state may tout that $4 billion has gone to education, but school officials say that number can be a bit disingenuous.

Bill Nolte, associate superintendent for Haywood County Schools, said lottery funding was supposed to provide additional funding for education, but it seems like every year legislators are budgeting less for education from the general fund and relying on lottery funds to make up the difference. Before the lottery was created, the counties received state funding for capital projects through the ADM (average daily membership) allotment, but now that money has disappeared.

“ADM is what the state used to give us, but that went away and they supplanted that with lottery funds,” Nolte said. “In an ideal world they would have not supplanted the ADM and they would have given us the lottery funds. And as sales increased across the state, funding would increase, but instead it’s been cut in half.”

Looking at the amount of lottery funding Haywood County has received for capital projects over the last nine years, the numbers have been all over the board. The county started out getting $373,459 in 2007 and received just over $1 million in 2011 when the state was receiving federal stimulus dollars, but that allocation was cut in half the next year. Haywood County is expecting to receive only $179,000 in 2016. The uncertainty in funding makes it difficult for the school system to rely on lottery funds for maintenance or construction projects….

So where is the general fund money going if it isn’t going toward education?

[Rep. Joe Sam] Queen said he knows exactly where it’s going.

“The lottery was sold to the public as extra money for education, but Republican legislators have cut the base funding and supplanted the revenue from the lottery, so the net hasn’t been positive for education,” he said. “And that base funding has been given away in tax cuts to the wealthiest individuals and corporations in North Carolina.”

Queen said Republican legislators have been deceptive in saying that education spending has increased over the last few years while the party has been in the majority in Raleigh.

“They’ve been cutting education for the last two years and back-filled it with lottery money,” he said. “And they haven’t even restored the funding cuts that were necessary during the recession.”

During the recession, North Carolina befitted from more than $15 million in federal stimulus money. Nearly $3 million of that went to the Department of Public Instruction, but after that money dried up and the state budget began to recover, the education budget never did.

The bottom line: The lottery has been a boondoggle from the start — both in the deception that is so ingrained in its marketing and education messages and in the regressive way it raises money. If North Carolina wants to have a publicly-run gambling enterprise, that’s fine, but it would be better off to put all of the money into prizes and dispense with the deception and regressivity that are inherent in the current system.

Click here to read Stone’s story.

Commentary

Editorial: Further shift onto sales tax is a bad move for NC

Tax shiftIn their never ending quest to tilt it more and more in favor of themselves and their wealthy backers, state lawmakers are again touting a plan to shift North Carolina’s tax system away from income taxes and further onto the sales tax.

As Raleigh’s News & Observer reported in this article, the move was endorsed this week at a legislative hearing by a right-wing group that calls itself the Tax Foundation. Critics of the idea were not invited to speak.

Such a shift is a dreadful idea.

Not only will it make our tax system more regressive than it already is (thereby taxing the wealthy at much lower rates than the poor and middle class), it will make the system much less flexible and resilient to meet the needs of a growing state. While it does make sense to broaden the base of the sales tax to capture more economic transactions, this should be married with a plan to lower sales tax rates so that the tax does not become a monster.

For a healthy revenue system that remains stable and is better able to withstand the ups and downs of the economy, North Carolina needs a healthy balance of a progressive personal income tax, a broad-based sales tax and reasonable property taxes at the local level.

An editorial in this morning’s Fayetteville Observer puts it gently but accurately in assessing this week’s hearing:

“Legislators didn’t invite any opposing viewpoints. It’s clear that the architects of state tax policy want to more aggressively cut corporate and personal income taxes.

If the lawmakers had invited tax experts with differing views, they might have considered the impact that a shift to broader sales taxes has on the poor, who spend a larger percentage of their incomes on basic goods and services. It’s the same problem that plagues proposals for a “flat tax.” Wealthier people who don’t need all of their income for living expenses pay a far smaller share of their earnings in taxes. The shift away from income taxes and toward consumption taxes is one of the driving forces behind the growing gap between rich and poor in the U.S.

While we agree that some shift of sales taxes to services was unavoidable in an increasingly service-based economy, we hope state tax code writers move with caution there, lest they create even broader gulfs between the haves and the have-nots.”

Commentary

Powerful new infographic connects tax policy to the nation’s raging inequality

As the good people at the great website Too Much Online regularly point out, U.S. inequality is now hitting astounding levels. Consider the following from the group’s recent newsletter:

“You can’t really appreciate how phenomenally unequal the United States has become until you take a gander at America’s peer nations. Consider the UK, for instance. Britain has emerged as one of the world’s most unequal nations. New official UK stats certainly reinforce that reputation.

In the UK, the new numbers show, the richest 10 percent hold 45 percent of the nation’s private wealth. The poorest half own just 9 percent.

But this UK inequality simply pales against the inequity across the pond. In the United States, the latest Federal Reserve figures point out, the top 10 percent owns 75.3 percent of our national wealth. And the households of the bottom half? Their wealth holdings add up to just 1.1 percent.”

Now check out the group’s new infographic about how our regressive tax structure contributes to this situation:

taxing-the-ultra-rich-a-little-history-1-638

Commentary

Crickets chirping: The right falls silent as McCrory and G.A. enact regressive tax hikes

Here’s the deal on the subject of expanding the sales tax base to include services as Gov. McCrory and the General Assembly have decided to do: It actually can be a good idea, but only if it’s paired with a plan to lower the overall sales tax rate and provide targeted tax cuts (like the Earned Income Tax Credit) to lower income people.

Unfortunately and remarkably, however, McCrory and state lawmakers are simply ignoring this simple truth and instead pairing the sales tax expansion with personal and corporate income tax cuts that overwhelmingly favor the wealthy. As Chris Fitzsimon pointed out this afternoon:

“Supporters of the new sales tax plan claim that it is not a tax increase, that it will be offset by a reduction in the personal income tax rate. But that’s not true for the folks at the bottom of the economic ladder who will receive very little, if anything, from the income tax cut.

Millionaires by the way will receive a $2,000 break and that’s on top of the windfall they received in the 2013 tax cut package.

Low income folks won’t be so lucky.

You might be wondering how this regressive tax scheme passed the General Assembly and what people said it about it as it made its way through the legislative process.

It never went through any committee. It appeared out of nowhere in the final budget agreement and questions about the formula and how to distribute the money in future years were not answered

Proposals to restore the state Earned Income Tax Credit to help low wage workers and their families that could offset a sales tax hike have also been repeatedly ignored.

There are plenty of reasons why the budget unveiled by House and Senate leaders this week takes North Carolina in the wrong direction.

One big one is that it raises taxes on people who can least afford to pay more.”

Meanwhile, that sound of crickets chirping? That’s the response to the new plan from the far right think tanks that have lectured us for years about the supposed evil of raising taxes in North Carolina. By all indications, they go along with the Governor’s bizarre take that raising taxes on people at the bottom is okay so long as the result is to reduce state revenue overall. Talk about your worst of all worlds outcomes.

Commentary

Troubled homeowners lose out again in gas tax compromise

foreclosed house-for Rob(1).jpgHere’s an issue from the current state policy debate that hasn’t gotten nearly enough attention in recent days: the General Assembly’s new plan to tax homeowners who manage to get some of their debt forgiven in order to avoid foreclosure and stay in their homes. Under the new gas tax compromise brokered by the House and Senate and tentatively approved yesterday, the Senate’s original plan to tax these homeowners for the loan forgiveness — something the feds do not do — has been put back in the bill.

As the one state capital journalist who has been doing a consistently solid job of following this issue, Mark Binker of WRAL, reported last week:

“North Carolina has decided to charge taxes on some items that would have gone untaxed due to changes to federal laws. The most controversial change along these lines has to do with mortgage debt that is forgiven.

When someone who is in a financial pinch has the amount they owe on their home forgiven through a debt relief program, that can be counted as income. The federal government decided not to tax this amount, but the state will under the Senate Bill 20.

This change was controversial when the measure passed through the Senate because it levies a big tax bill on those trying to work their way out of debt. When House lawmakers first passed this bill, they excluded the mortgage forgiveness from taxes. The compromise measure takes the Senate position.”

You got that? even as people throughout the state gnash teeth and get hot under the collar about a few pennies on a gallon of gas, many North Carolinians will now quite possibly and unnecessarily lose their homes as the result of new taxes that directly defeat the purpose of public programs that were designed to save them. The move is, in short, a perfect symbol of the shortsighted and regressive approach to tax policy that is one of the signature features of the current state political leadership.