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NC Budget and Tax Center

We still don’t know exactly what kind of tax and budget deal will emerge from the legislature when it wraps up business in the coming weeks, but it will likely include another round of tax cuts for large multi-state corporations. We’ve also seen an alarming push to bake further tax reductions and spending limits into the state constitution, called TABOR, which would constitutionally mandate policy that we’ve never even tested through regular legislation, and which has been a proven failure in Colorado. Against this backdrop, remember that there is no evidence that tax cuts can solve the economic challenges that we face.

Tax cuts have not improved North Carolina wages. Now that we have recovered from the worst of the Great Recession, many economists see a lack of wage growth our most pressing economic challenge. Wages in North Carolina are even more stagnate than for the US as a whole, a problem that has not been solved by tax cuts over the last few years. The average hourly wage in North Carolina is now roughly $3 less than the national average, a gap that has actually widened since the first major round of recent tax cuts passed in 2013. Tax cuts have not solved our wage problem, and there’s no reason to expect that change.

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NC Budget and Tax Center

After enacting huge, costly income tax cuts in recent years that largely benefited the state’s wealthiest people and biggest, most profitable corporations, pursuing more tax cuts would threaten North Carolina’s economy – and yet it appears state lawmakers are doing just that.

Questions remain about what will or won’t be in the budget the Legislature passes. What is known, though, is that the spending target agreed upon by the House and Senate is $230 million less than what the state is projected to take in over the year from tax revenue.

If that turns out to mean a tax-cut proposal, it will come in the face of strong evidence that such a strategy doesn’t deliver widespread economic benefits.  North Carolina is experiencing a very uneven economic recovery. Many people still can’t find jobs and many who are working are being paid less than what it takes to make ends meet. Tax cuts aren’t going to create the jobs North Carolina needs and they take resources away from what the state should invest in to promote real growth – quality public schools, affordable higher education, modern infrastructure, and safe and healthy communities, for example.

A continued pursuit of failed trickle-down economics policies would occur as investments in those public services and others are still below pre-recession levels and insufficient to meet growing needs.

State lawmakers are pursuing two paths to usher in more income tax cuts.

One path builds more tax cuts into the state budget. Budgets passed by both the House and the Senate lower the corporate income tax rate to 3 percent from 5 percent over the next two years. These tax cuts will result in more than $450 million less available to the state for public services over the next two years. As we’ve highlighted previously, cutting corporate income taxes won’t boost North Carolina’s economy; taxes are but a fraction of a business’s costs. Furthermore, the Senate’s budget changes how corporations apportion their income for state income tax purposes and reduces the corporate franchise tax rate. In total, tax changes included in the Senate’s budget would result in nearly $1 billion in less state revenue over the next two years.

The second path, Senate Bill 607, would amend the state constitution to arbitrarily cap the state income tax rate at 5 percent. This would reduce annual state revenue for public investments by around $1.5 billion. The result would mean more erosion of vital services and probably other tax increases – most likely the state sales tax. In combination with other proposed changes to the state constitution, this path would hamstring state lawmakers in the years ahead from meeting the priorities of North Carolinians by restricting the overall level of investment in our public schools, public colleges and universities, and other important areas.

These two paths that state lawmakers are pursuing are troublesome, particularly at a time when investing in North Carolina’s future is important to the state’s economic prospects. Consequently, the continued pursuit of trickle-down economics fails to promote broadly shared prosperity and prevents the entire state from moving forward together.

Commentary

Moore_15cRaleigh’s News & Observer ran a big profile of House Speaker Tim Moore over the weekend in which it highlighted the fact that Moore’s tenure has not quite matched the hard right ideological fervor of his predecessor, Thom Tillis, or the current leadership of the state Senate. At times, he’s even worked with Democrats to help pass some measures, including the budget and the recent state bond package. In addition, he’s made somewhat less use of the abusive tactics favored by Tillis for shutting down debate and occasionally has raised the ire of some fire-breathers on the far right.

Before observers get too carried away with this portrayal, however, it’s important to note that it says a lot more about how bizarrely extreme the modern right wing has become than it does about any significant moderation by Moore. By any fair assessment, Moore’s politics remain far to the right of Ronald Reagan. Consider the following items and issues on which Moore has adhered to or advanced a downright reactionary agenda:

Medicaid expansion:  On the single most important issue before state government — a policy change already enacted by Republicans all over the country that could save thousands of lives and lift up the state economy — Moore continues to do nothing.

Public education: Moore continues to help advance the Right’s pro-voucher, pro-charters privatization agenda and has done little-to-nothing to repair the damage inflicted on K-12 funding in recent years.

Environmental protection: Under Moore’s leadership, the list of proposals to gut environmental protection just keep on coming.

Taxes: Though he has not yet completely embraced the Senate’s extreme efforts to mimic the suicidal policies of states like Kansas, Moore continues to support additional tax cuts for corporations even as the state struggles to meet its most basic needs. He’s also done nothing to repair the damage caused by the  destructive 2013 tax cuts or to reinstate the critically important Earned Income Tax Credit.

LGBT equality, reproductive rights, the death penalty, guns: And, of course, Moore has promoted the far right “social agenda” on each of these issues in 2015, including: the discriminatory “religious freedom” law for magistrates and registers of deeds, the bill to up the state’s absurd  abortion waiting period, the bill to keep death penalty drugs shrouded in secrecy and the bill to introduce concealed weapons into even more venues.

The confederate flag: Moore has done nothing to end the state’s embarrassing display of the rebel flag on license plates and has made it harder to remove confederate memorials.

The bottom line: Speaker Moore may be an affable guy who takes it a tiny bit slower than some when it comes to the most extreme components of the far right agenda, but in a world in which much of the modern American Right backs Donald Trump for President and openly consorts with groups and individuals that favor “nullification” of federal laws, this should not be confused with “moderation.” On issue after issue, Moore continues push North Carolina dramatically and rapidly backwards.

Commentary

Columnist Myron B. Pitts of the Fayetteville Observer has an excellent, if sobering, essay this morning about the North Carolina General Assembly. It’s entitled “State’s decisions, from bad to abysmal” and it attempts to rank the worst decisions made by North Carolina lawmakers over the past half decade. Admittedly, Pitts has carved out a daunting task for himself, but see if you agree with his list, which starts with the awful 2013 tax changes and runs through the death-promoting decision to deny health insurance to hundreds of thousands of people.

NOTE: As the General Assembly is still in session, the list may well have to be updated in the coming weeks. Stay tuned and feel free to offer your additions.

Click here to read Pitts’ list.

NC Budget and Tax Center

Revenues that fuel the state budget are growing so slowly that they are not even keeping pace with population-plus-inflation growth, according to Barry Boardman who is the chief economist for the state legislature’s non-partisan Fiscal Research Division. Weak economic growth and tax cuts are keeping state revenues low, Boardman explained during a presentation that he gave to lawmakers earlier this week.

More tax cuts are looming too—a move that will sustain the damaging trend of slow revenue growth that makes it harder to meet basic needs and build a stronger economy. The House and Senate leadership put forward budgets that included additional tax cuts totaling approximately $652 million and $950 million, respectively, over the next two years.

The presentation shows that during the immediate years before the Great Recession, state revenues were growing faster than the inflation-plus-population benchmark. At that time, the state tax code was better suited and comprised of a progressive income tax based on ability to pay. The trend reversed after the 2008 fiscal year, with the population-plus-inflation growth rate outpacing revenue growth. The economic downturn caused revenues to plummet. And before revenues were able to fully recover back to pre-recession levels, lawmakers cut taxes deeply as part of the 2013 tax plan.

Revenues are not expected to outpace population-plus-inflation growth in either of the next two years; they are expected to remain below the long-run historical average. Read More