Tag: Tax reform

Eliminating income taxes not a solution to addressing the ups and downs of revenue

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May 23, 2013 at 4:19 pmCategory:NC Budget and Tax Center

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The proposed Senate tax plan and the recently released House tax plan aim to eliminate the personal income and corporate income taxes. These two taxes raise more than $11 billion and represent over half of the state’s total tax revenue. Among the contentions made by proponents of cutting and eliminating income taxes is that doing so will make the state’s revenue system more stable.

A 2013 report by the Center on Budget and Policy Priorities (CBPP) finds that, over the long-term, income taxes grow more than other state taxes and better reflect economic performance. Importantly, the income tax is not significantly more unstable than sales tax when viewed over time. And the benefit of the long-run growth of the income tax is lost with its elimination. Read More…

Louisiana Governor “parks” unpopular tax plan

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May 15, 2013 at 10:15 amCategory:NC Budget and Tax Center

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This is the third of a three-part blog series presenting voices from other states that have unsuccessfully pursued versions of comprehensive tax “reform”. (See Part 1 and Part 2)

Commentary provided by Jan Moller, Director of the Louisiana Budget Project in Baton Rouge, LA.

Louisiana Budget Project

Louisiana is a conservative state with a very conservative governor who, until recently, was one of the most popular in the country.

But when Gov. Bobby Jindal unveiled a “revenue neutral” plan to eliminate Louisiana’s individual and corporate income taxes this year, something extraordinary happened: the people of Louisiana stood up, and the governor backed down. Less than three months after the plan was announced, the governor admitted defeat and said he was “parking” his package of bills. A week later, the chairman of the House tax-writing committee said any efforts to scrap the income tax were dead for the year. Read More…

Georgia’s failed tax reform effort holds a warning for North Carolina

May 9, 2013 at 1:06 pmCategory:NC Budget and Tax Center | Uncategorized

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This is the first of a four-part blog series presenting voices from other states that have unsuccessfully pursued versions of comprehensive tax “reform.”

gbpi

Commentary provided by Alan Essig, Executive Director of the Georgia Budget and Policy Institute in Atlanta, GA.

As North Carolina considers major tax reform, it’s useful to take a look at a similar effort in Georgia a few years ago, because what started out as a plan to overhaul the state’s tax system in a responsible way that preserved important state investments quickly devolved into a proposal that put ideology and politics above the welfare of Georgians.

The core of Georgia’s problem was similar to what you are now seeing in North Carolina: the pursuit of drastic income tax cuts paired with a failure to replace this with another revenue source makes it impossible for a state to provide the services that people and businesses depend on every day, like roads, schools, and safe communities. Georgia wisely chose to reject such a proposal in 2011, just as North Carolina should this year. Read More…

Eliminating estate tax provides tax cut to North Carolina’s wealthiest individuals

May 8, 2013 at 4:30 pmCategory:NC Budget and Tax Center

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Comprehensive tax reform remains vague and “short on details” as the 2013 legislative session is beyond its halfway point. Nevertheless, stand-alone bills continue to make their way through the legislative process that would provide tax cuts to the state’s wealthiest individuals. Policymakers have just voted in the House to eliminate the estate tax and both the Senate leadership and the Governor have stated their commitment to do the same.

Proponents of eliminating the estate tax argue that the tax punishes small businesses and small farms in North Carolina. Evidence shows this claim to be false. The estate tax applies to a small number of taxpayers in North Carolina – less than one percent. For tax year 2011, only 23 North Carolina tax filers were subject to the estate tax, according to the North Carolina Department of Revenue. The reality is that the overwhelming majority of small businesses and small farms will not a pay an estate tax while heirs of the wealthiest estates in the state will. Read More…

Another key justification for tax cuts bites the dust: NC economy is already competitive with neighboring states

May 8, 2013 at 10:36 amCategory:NC Budget and Tax Center

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Throughout the ongoing tax reform debate, we’ve been hearing the same tired claims that North Carolina’s economy is failing to compete with our neighboring states. And during yesterday’s preview of the Senate tax reform plan, we heard it again as justification for a billion dollar tax cut.

There’s just one problem—these claims are simply not true. 

As a report released last week found, it’s clear that North Carolina’s economy is performing competitively with surrounding states across every major indicator of economic health, with the exception of the unemployment rate. 

And North Carolina has higher unemployment than neighboring states today because the Tarheel State has historically relied to greater extent on a handful of manufacturing industries that have proved much more vulnerable to offshoring, outsourcing, and global cost pressures.  In 2000, more than 16 percent of North Carolina’s employment was concentrated in manufacturing, the most of any surrounding states. North Carolina lost almost 42 percent of its manufacturing employment between 2000 and 2011, greater than the loss experienced by any other neighboring state.

In fact, if North Carolina’s share of total employment in durable and non-durable goods manufacturing had resembled that of the nation as a whole, the Tarheel State would have 108,000 more jobs today than currently exist, and the state’s unemployment rate would likely be similar to neighboring states.

As a result, North Carolina’s unemployment problem is due to declining competitiveness in specific industries—not to lack of competitiveness in the overall business climate or tax policy. Faced with these very specific challenges, investing in job training and infrastructure to attract and grow the competitive industries of the future is a far better approach to reducing unemployment than the tax cuts currently discussed by the legislature.