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Three must read stories from the weekend’s news paint a remarkable picture of the pocketbook changes many North Carolina families are facing these day.

The News & Observer’s David Ranii writes that many North Carolinians are in for a rude awakening as they complete their state taxes this year. Reforms enacted by the NC General Assembly and signed by Gov. Pat McCrory have shifted the state’s tax burden to many lower-income residents and senior citizens.

Here’s more from the article:

Cedric Johnson, public policy analyst for the N.C. Justice Center’s Budget and Tax Center, has a different take on the changes.

“Taxpayers making under ($67,000), which is around 80 percent of taxpayers in North Carolina, will, on average, see their taxes increase under the tax plan,” he said.

The Justice Center’s analysis encompasses both income tax and sales tax. In conjunction with the overhaul of the income tax, the state sales tax was expanded beginning last year. Added to the sales tax list was, among other things, service contracts for appliances and cars and a broad range of admissions charges, including movies and sporting events.

The working poor in particular are taking it on the chin because of the elimination of the earned income tax credit, which was designed to help them make ends meet, Johnson said.

Read Ranii’s full piece here.

Across-the-board raises fade for state workers

The Associated Press’ weekender details how the McCrory administration is hoping to move away from the routine budgetary practice of across-the-board pay raises for state employees. Gary Robertson explains:

McCrory’s two-year spending plan offers neither all public school teachers nor rank-and-file state employees across-the-board raises. Rather, the governor emphasizes improving pay for certain teachers and targeting state employees in hard-to-fill or dangerous law enforcement positions.

The lack of across-the-board raises partly reflects the uncertainty of tax collections, which have grown year-to-year but have fallen short of initial forecasts in a slow-recovering economy. The GOP-led General Assembly might offer across-the-board raises if revenues surge.

But McCrory suggested last week his administration is moving away from the expectation of raises for everyone every year.

For more on how Governor McCrory wants to handle pay raises moving forward click below:

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Homeownership rates decline

The final story comes from the Carolina Population Center at UNC-Chapel Hill.

Rebecca Tippett, Director of Carolina Demography, writes that homeownership rates in North Carolina have hit the lowest rate ever:

North Carolina homeownership hit a high of 73.6% in 1981, then declined slightly before rising again and holding steady at the low 70s before 2005. After 2005, homeownership rates declined steadily. North Carolina’s homeownership rate was 66.5% in 2014, the lowest it has been at any point.

homeownership rates_UNC Demography

(Hat tip Seth Effron)

NC Budget and Tax Center

Tax cuts never live up to the extravagant promises of job creation and economic growth so often made by their supporters, and last year’s tax reductions are unlikely to turn out any differently. The most recent example is Kansas, which enacted massive tax cuts in 2011. Two years later the state has experienced slower job growth than the national average, contraction in the number of businesses employing people, and loss of its AAA bond rating resulting from its catastrophic, 50% loss in revenue.

While there remains no consensus among academic economists that tax cuts are a strategy to grow the economy—instead, evidence is mounting of their harm—some think tanks keep trying to play the same hand to get a different result. One example is the Beacon Hill Institute, which has frequently deployed its State Tax Analysis Modeling Program (STAMP) during tax cut debates in various states across the country, including last year in North Carolina. Using this model, Beacon Hill claims to show that lowering taxes, or refusing to raise them, will benefit state economies. In the case of North Carolina, they also went a step further to claim that all income groups get a tax cut on average.

A new report from the Institute on Taxation and Economic Policy reveals a number of serious flaws in the STAMP approach that undermine the accuracy of its claims. In doing so, it calls into question the rosy scenario Beacon Hill paints for tax-cutting states like North Carolina.

Follow me below the fold for are some of the problems identified by ITEP:

Read More

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.

Read More

NC Budget and Tax Center

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

Uncategorized

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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