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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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North Carolina is known for having an appealing quality of life, with communities across the state offering a great place to raise a family and operate a business. Safe and healthy communities play an important role in contributing to this quality of life in what we North Carolinians call home.

Decisions made by state leaders highlight a lagging commitment to enhancing the quality of life within communities across the Tar Heel state. In the current budget, state leaders disregarded Gov. McCrory’s recommendation to provide funding for drug treatment courts, which is a cost-efficient way to provide drug treatment and support to individuals with substance abuse dependencies. State lawmakers did however create “cost savings” by reclassifying certain low-level offenses and allowing them to be punishable by fines instead of jail time – one particular tradeoff is that such defendants will now have convictions on their records despite not having a right to counsel. This could affect their employment prospects and access to other opportunities. Read More

Governor Pat McCrory made it clear Tuesday that North Carolina’s teachers would see a raise in 2014. What is less clear is just how large that raise will be and where the money will come from.

Senator Josh Stein says there is no doubt that educators should be paid more, but he has concerns the governor’s rhetoric may not match the state’s economic reality:

“Let’s see if the commitment is there to get us to the national average in four years,” said Stein in an interview with N.C. Policy Watch. “Unfortunately the tax breaks that they gave to the wealthiest one percent are going to suck out an additional $600 million out of our budget next year and every year thereafter. So it’s going to be a real challenge, but it’s a challenge we need to meet.”

According to the Budget & Tax Center, the tax plan passed last year by the Republican-controlled legislature and signed by Governor McCrory will reduce revenue by $650 million per year when fully implemented. Another way of looking at that is that state spending will decline by more than $2 billion over the next five years.

By comparison, the cost for a two-percent pay raise for teachers and state employees would be about $682.8 million for the biennium.

Stein joins us this weekend on News and Views to discuss teacher pay, tax changes, and the administration’s refusal to expand Medicaid. For a preview of his radio interview with Chris Fitzsimon, click below:
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If you dressed a wolf in sheep’s clothing, would you then believe it was a sheep?

The leadership in the General Assembly and its allies hope you will. Proponents of the state’s new tax law are trying desperately to justify it, most recently by citing pennies in tax cuts for low- and middle-income North Carolina families in 2011, hoping you’ll ignore the harm the recently passed package will cause.

Most of the 2013 tax plan goes into effect this year, and for the vast majority of North Carolinians the picture is bleak.

The Budget and Tax Center’s analysis of the plan shows that when you consider all the tax changes and compare them to previous tax law, on average, people making under $84,000 a year – the bottom 80% of North Carolina taxpayers will see their taxes go up.

In a new analysis, proponents of the plan are touting the 2011 expiration of a temporary sales tax increase as evidence that low- and middle-income earners are better off.  They fail to note that lawmakers allowed a surcharge on high-income earners to expire (a tax cut of around $200 million) in 2011 too.  The expiration of the surcharge will actually generate an even greater tax cut for high-income taxpayers.

There are other key facts that get soft-pedaled in the Locke Foundation’s analysis. Read More

The N.C. Education Lottery had an unusual sales pitch today, telling players that hitting it big in 2014 will mean less taxes and more winnings

In a tweet sent out this afternoon, the official state lottery Twitter account pointed out that the state’s new flat 5.8 percent income tax, which eliminated a progressive tax structure where the poorest pay a lower percentage of income taxes than those with higher incomes, is a bonus for lottery winners.

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The tweet links to two news releases put out by the state-run lottery that showcases how a Rocky Mount man with a $1 million Powerball ticket and a firefighter in the western part of the state are paying $7,000 to $12,000 less in income taxes in 2014 than they would have if they won in 2013.

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