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NC Budget and Tax Center

Another round of tax cuts for corporations, extended tax breaks for selected industries, and considerable fee hikes for families and businesses are included in the tax and budget package that the House leadership unveiled yesterday afternoon. Because tax changes affect the level of state resources that are available for investment, lawmakers must decide on its tax priorities ahead of approving their budget bill for the upcoming 2015-17 biennium. The House Finance committee tweaked the tax changes last night and now the budget bill is moving through the committee process with the expectation of a final vote on the House floor by Friday.

How the state raises the money that supports public schools, health care, courts and other core supports to the economy and communities should get just as much scrutiny as the spending side of the budget debate—but this is rarely the case. Examining how lawmakers pay for the budget is important in light of the 2013 tax plan that continues to drain resources, which otherwise could have been used to build opportunity and replace the worst cuts enacted since the economic downturn.

The House leadership pays for its FY2016 budget proposal in the following way: Read More

NC Budget and Tax Center

Last week, state officials announced that revenues are estimated to come in $400 million above projections set by the state. This is good news for North Carolina, as we previously noted, but it’s important to remember that it is a relatively small boost that doesn’t come close to covering the cuts to services made since the recession and is likely one-time money driven by the improving national economy, not North Carolina’s tax code. These considerations are timely as the House plans to fast track its budget, with the goal to release and approve a proposal by the end of next week ahead of the holiday weekend.

Most importantly, this revenue announcement will not come close to addressing the challenges that state budget writers face. There remains a very deep level of underinvestment in schools, higher education, and communities, and lawmakers’ choice to pass cut taxes that primarily benefit the wealthy and profitable corporations in 2014 and again in 2015 means that there are far fewer dollars available to position the state competitively.

Here are a few things about the revised revenue estimates that state lawmakers should keep in mind as they work on the state budget:

  1. A surplus means we have more than we expected, not that we have more than we need.

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NC Budget and Tax Center, Poverty and Income Data 2013

Poverty remained high in North Carolina last year, according to new Census Bureau data released today. The new data highlights that many people have not benefitted from the state’s weak economic recovery and that North Carolina must do more to help struggling people afford basics like decent housing, nutritious food, and reliable child care, and transportation.

One in five North Carolinians lived in poverty in 2013, equating less than $24,000 a year for a family of four. The median annual income in North Carolina adjusted for inflation did not rise between 2012 and 2013 and is lower now compared to 2009 when the official economic recovery began. Yet other sources show that incomes at the top have grown and the gaps between the top and bottom and top and middle have widened.

North Carolina lawmakers have yet to rebuild what was lost during the recession. Throughout the economic recovery, they have either made deep cuts to or provided inadequate investments for early childhood development, public schools, the UNC System, and nonprofits promoting job and business development in the state’s economically distressed areas. These are key services that invest in people’s future and build a strong economy that offers all families the opportunity to thrive. Lawmakers have also dismantled services that help people get back on their feet when they are struggling, including unemployment benefits, job training programs, and the Earned Income Tax Credit that makes work pay and helps parents avoid raising their children in poverty.

The new Census data shows that progress towards eliminating poverty in the state is stuck: Read More

NC Budget and Tax Center

Economic hardship persisted at high levels in the nation and North Carolina in 2013, according to new figures released today from the Census Bureau’s Current Population Survey (CPS). The 2013 national poverty rate was 14.5 percent, down from 15 percent in 2012 but still well-above pre-recession levels four years into the official economic recovery. There were 45.3 million Americans living below the official federal poverty line, which was $11,490 for an individual and $23,550 for a family of four in 2013.

There is broad consensus that poverty rates will not drop to pre-recession levels anytime soon. And, two economic factors suggested that poverty rates would remain elevated in 2013, as the Center on Budget and Policy Priorities explains. First, the economy is growing but those gains continue to bypass middle- and lower-income families and are mostly benefitting the wealthy. Second, lawmakers enacted austerity measures in 2013 that reduced public contributions to the economy and failed to put children, families, and communities on a better path forward. Read More

Back to School Series, NC Budget and Tax Center

This is part of a Back to School blog series that highlight various issues to be aware of as the 2014-15 school year kicks off. (See Part 1 and Part 2)

This week, more than 1.5 million North Carolina’s students headed back to school to underfunded classrooms. For yet another school year, teachers will do their best to prepare today’s students to grow into critical thinkers and succeed as workers in a demanding 21st century economy with too few resources available. Legislative leadership and the Governor approved a budget that fails to make up lost ground in public education, keeping spending below the last budget that was in place before the Great Recession.

In fact, when the pay raises for teachers are properly placed in the salaries and reserves section of the General Fund budget and not the public education section—a practice that has long been in place—public education spending in the new budget is below last year’s spending levels (see graphic below). This certainly is not progress, but rather sliding backwards with a budget trick used as cover.

Five years into the recovery from the worst economic downturn since the 1930s, catching up and keeping up with the needs of North Carolina’s students is stalled due to the fact that lawmakers chose to enact a tax plan last year that keeps the state from replacing the most damaging cuts to public investments. The 2013 tax plan is draining available resources—$5.4 billion over five years—that is needed to regain lost ground and reinvest in the building blocks of a strong economy. The tax plan’s impact is evident throughout the final budget for fiscal year 2015. Read More