Archives

NC Budget and Tax Center

On Wednesday, the Senate Finance committee heard presentations that made the case for more changes to the state’s tax code. While beginning with many of the economic realities in North Carolina—stagnant and falling wages, persistently high poverty, and slow growth— the presentation prescribes the wrong medicine: more cuts to the income tax in favor of applying the sales tax to more goods and services.

It’s a surprising conclusion to reach as prior “reform” efforts based on income tax cuts for the wealthy and profitable corporations have not allowed North Carolina to invest in the state’s economic recovery. It’s even worse with evidence mounting that shifting more of the tax load onto average people is causing real damage.

It’s clear that more tax cuts for the wealthy and profitable corporations aren’t the best tools to address the economic issues highlighted in the presentation. Tax cuts do nothing to address the fact that workers aren’t seeing their wages grow, despite increasing productivity. Tax cuts that primarily benefit the wealthy and profitable corporations do not help alleviate poverty. Instead, such an approach jeopardizes the ability of the state to invest in pathways to opportunity—the schools, research and development, and business start-ups that create a vibrant economy.

We have long advocated for tax reform, and a genuine and thoughtful plan to modernize our tax code is still needed today – not in spite of 2013 tax changes, but because of them. But shifting the state away from the income tax to rely more on sales taxes, as the leadership presented yesterday, will make things worse, not better. It will not help address the ups and downs in revenue collections and will mean that everyday North Carolinians carry more of the tax load while wealthy taxpayers get a tax cut. This is especially true if such tax shifts don’t seek to offset a greater reliance on sales tax with a strong state EITC.

Here is what should be the focus of legislators’ reform efforts: Read More

Commentary

Gas pumpThe Senate finalized its hurried approval of a new gas tax proposal today and as Budget and Tax Center analyst Tazra Mitchell explained yesterday, there are actually some things to like in it. Most notable among these is the bill’s recognition that tax rates will have to rise in the coming months and years to begin to meet the state’s infrastructure needs.

As today’s Fitzsimon File explains, however, the bill has some obvious and significant problems as well. First, is the wholly inadequate process whereby such a momentous and complicated proposal was rammed through with essentially no opportunity for public input. Second, is the silly camouflage that’s been added in the form of a temporary tax cut that will cost hundreds of Department of Transportation workers their jobs. And third is the inclusion of a totally unrelated proposal to tax people who lose their homes in foreclosure for some of the debt relief they receive (mind you, the people have still lost their homes). Great target for higher taxes there, senators!

Let’s hope the House addresses these flaws when the bill moves to the other side of the Legislative Building next week. Let’s also hope that the House considers one very obvious tool to address the inherently regressive nature of a rising gas tax: reinstating the state earned income tax credit (or EITC).

As Mitchell explained yesterday:

“Policymakers should reinstate a state EITC to offset the fact that the gas tax hits low- and middle-income taxpayers hardest. The state EITC was a key tool to ensuring that low-wage could keep more of what they earn and afford the costs of working, including gas and child care.  Reinstating a state EITC to ensure that the gas tax does not further increase the tax responsibility on working North Carolinians struggling to make ends meet is critical.”
Stay tuned.
Commentary

EITC_ncToday marks a little known “holiday”: Earned Income Tax Credit (EITC) Awareness Day. The IRS-led national event is intended – as the title implies – to spread awareness about this modest but vital tax credit and make sure that all qualified workers receive it. The day is as much about educating people as to what exactly the EITC is as it is about directing individuals to sites where they can get free tax help to claim the credit. For those that do, often for just two or three years, it can mean the difference between struggling for another year and getting back on your feet.

In North Carolina, however, the day isn’t so simple. In fact it’s hard to find cause for celebration in the only state in the country to have eliminated the credit.

There are plenty of individuals who are fully aware of what the EITC means for their own lives as well as those of their neighbors, despite its absence in the Tar Heel state. Last year, NC Justice Center staff spoke to individuals across the state that had been directly impacted by the credit and acutely felt the loss of the EITC.

They talked about how the EITC arrived at the perfect moment in their lives: when they gave birth to a child with medical needs and struggled to pay hospital bills; when they were stuck in a low-wage job that wouldn’t allow them to save enough to pay off their debts; or when they were hoping to finally become a homeowner after relying on family and friends for shelter. These were all working North Carolinians. Their stories were familiar and at times heartbreaking. Some are still struggling, and others saw their families lifted out of poverty thanks in part to the EITC. They are the individuals who once relied on the EITC and urge policymakers to reinstate the credit – not only for themselves, but so that other families can feel the benefits.

A few basic facts on the state EITC that bear repeating: Read More

Uncategorized

Some of the most damning facts about the state of North Carolina’s tax system and what the most recent changes enacted by state leaders really portend for average families — especially the state’s one-of-a-kind repeal of the Earned Income Tax Credit — were explained at a Budget and Tax Center press briefing this morning. This is from a statement the group released after the event:

“The tax plan passed by the General Assembly during the 2013 legislative session resulted in a tax shift onto working families. Advocates from around the state joined together on Tax Day to bring awareness to the plan, which is bad for working families, children, business, and the economy. Under the new plan, which will took effect in January 2014 and will impact income tax filing in 2015, low- and middle-income families will see their taxes go up on average, while wealthy taxpayers and corporations saw large tax cuts.   Read More

Uncategorized

ff-8292013It’s depressing as hell, but everyone who cares about North Carolina public policy should make this new report by the N.C. Budget and Tax Center’s Cedric Johnson: “Who Pays in 2014″ a part of their Tax Day reading list.

As Johnson reports:

“Changes are coming to who pays taxes in North Carolina, and the news is not good for middle- and low-income taxpayers. This tax season marks the final year taxpayers will file their income taxes under the state’s old tax code and by next year it will be apparent to many taxpayers that the tax plan has not just reduced available dollars for investing in core public services, but also has increased the tax load for many. Read More