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Posted by : Thursday, April 17, 2014 3 Comments In NC Budget and Tax Center

At his Tax Day press conference, Governor McCrory repeated the often-heard claim that the effect of cutting taxes on the state’s economy speaks for itself. Last year’s tax cuts may be speaking, but they’re not telling the story its proponents hoped—for the very good reason that tax cuts are just a poor strategy for promoting business growth and long-term job creation.

Here’s the Governor on Tuesday:

“Businesses are relocating to North Carolina because of the changes we made in our tax code and that speaks for itself.”

This claim does not bear up under serious scrutiny. In fact, decades of evidence support the opposite—taxes don’t drive business location decisions. Rather, the public investments that taxes make possible are the most important factors in determining where companies decide to locate—investments like an educated workforce, infrastructure, strong industry clusters, and proximity to research and development institutions.

So let’s examine the evidence Governor McCrory presented, starting with Lee Controls—a New Jersey-based company that recently relocated to Brunswick County and cited tax reform as one of the major reasons for their move. The company is promising to create just 77 jobs over several years. While creating even one new job moves the state in a positive direction, the fact remains that trying to dig North Carolina out of the job losses from the Great Recession is going to require more employment growth than can be generated by one 70-job project at a time.

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Posted by : Friday, March 28, 2014 4 Comments In NC Budget and Tax Center

What’s the deal in Kansas these days? That’s a question Governor McCrory and North Carolina’s state leaders should be asking themselves.

After passing huge tax cuts in recent years, the subsequent unimpressive economic performance and continued disinvestment in core public investments in Kansas serve as a cautionary tale for North Carolina.

A recently released report by the Center on Budget and Policy Priorities (CBPP) highlights how Kansas’ economic performance has failed to live up to the promises made by Governor Brownback and his legislative allies. Kansas passed huge income tax cuts in 2012 that reduced annual revenue for public investments by more than $800 million for FY 2014. Proponents claimed the tax cuts would boost the state’s economy.

Last year North Carolina followed Kansas’ lead when state leaders passed and Governor McCrory signed into law a tax plan that includes huge income tax rate cuts and reduces annual revenue by more than $650 million once all tax changes take effect. Here too, the governor and proponents claimed that cutting taxes will boost North Carolina’s economy.

So how is Kansas faring these days?

Kansas hasn’t experienced anything close to an economic surge in the wake of the huge tax cuts. Massive revenue loss has meant continued state funding cuts to core public investments – public schools, colleges and universities, and healthcare services, for example. Read More

Posted by : Thursday, March 20, 2014In NC Budget and Tax Center

As our state leaders continue to look for ways to give more and more tax cuts to profitable corporations, these corporations continue to find ways to avoid paying their fair share of taxes. It is a win-win proposition: Heads they win; Tails they still win!

A report released today by the Institute on Taxation and Economic Policy and Citizens for Tax Justice finds that 269 Fortune 500 companies collectively avoided paying $73.1 billion in state corporate income tax between 2008 and 2012. Nine of these multi-state corporations are headquartered in North Carolina and earned more than $51 billion in combined profits during this period.

The nine NC-based multi-state corporations paid an average overall corporate income tax rate of just 3.7 percent, which is well below North Carolina’s 6.9 percent statutory rate at the time. Unfortunately, our state leaders prefer to focus on optics rather than reality. Read More

Posted by : Friday, March 7, 2014 2 Comments In NC Budget and Tax Center

“We can’t afford it.” This is the prevailing refrain of state leaders nowadays in their efforts to explain away or rationalize their waning support for investing in North Carolina’s future.

Whether the issue is pay raises for K-12 teachers and other state employees, supporting targeted economic development initiatives, protecting the state’s natural resources and environment, one repeated excuse is that revenue is not available for such public investments.

This excuse was used once again in a memo by Art Pope, State Budget Director, in response to the UNC Board of Governors’ (BOG) 2014-15 budget request. In the memo, Pope informs the BOG that its budget “simply is not realistic” and warns that funding the respective budget request “would require the Governor and General Assembly to make major reductions in other state agencies and programs, such as our courts, the “K-12” public schools, and health care.”

North Carolina is NOT broke. The costly tax plan passed by the NC General Assembly and signed into law by Governor McCrory last year has created a self-imposed budget challenge. This challenge is occurring, as Pope acknowledges, even as the economy is improving. Read More

Posted by : Thursday, March 6, 2014In NC Budget and Tax Center

Last year state leaders passed a tax plan that will overwhelmingly benefit the wealthy and profitable corporations. The plan does little to rid the tax code of costly tax loopholes, it makes the state’s upside-down tax system even worse, and it reduces annual revenue by more than $650 million once all the new tax changes are in place.

As Gov. McCrory and state leaders try and “find’ revenue to provide a modest pay raise to only a portion of North Carolina’s public school teachers, more tax cuts for profitable corporations look to be on the horizon.

This week BTC released a policy brief that highlights an arcane tax policy change proposed by members of the NC General Assembly’s Revenue Laws Committees. This tax change – referred to as a single sales factor (SSF) apportionment formula – would only consider the sales component in determining the amount of state income taxes paid by corporations. The state’s current tax system uses a formula that considers a corporation’s property, payroll, and sales in North Carolina.

This tax change would provide a tax cut to only certain corporations, with no guarantee of job creation or a boost in economic growth for the state and would reduce revenue available for public investments by $90 million for FY 2015. This revenue loss would be in addition to the massive annual revenue loss under the tax plan passed last year. Read More

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