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school suppliesIn case you missed yesterday’s Fitzsimon File, be sure to check out the fascinating and damning find from the recent state budget that Chris highlights.

It turns out that conservative state lawmakers have been bragging in the aftermath of the 2015 session about how they revived a tax break for teachers that they previously put on the books in 2011 and then allowed to expire in 2013. The tax break provides a small deduction for teachers (at least, those well off enough to itemize deductions) for their out-of-pocket costs for purchasing classroom supplies up to $250. This means that if a teacher takes the full deduction — meaning they spent $250 or more on supplies — they would save a whopping $14.75 on their state tax bill!

You really can’t make this stuff up. As Chris noted yesterday:

“It [the tax deduction] reimburses teachers for [a tiny portion] of their purchases but also reminds them that the folks currently running things in Raleigh have no intention of properly funding the schools. And they are counting on teachers themselves to pick up the slack.

Thanks to cuts in recent sessions, there are now 7,500 fewer teacher assistants in the classroom before the recession.

Taking the philosophy of the tax credit for supplies to its logical conclusion, teachers who don’t like it and need the extra help in the classroom should stop complaining and hire the TAs themselves and pay them personally. Maybe lawmakers will reward them with another tax break worth a few dollars.

That’s what it has come to in our public schools. Adequately funding the classrooms is apparently no longer on the table.”

The bottom line: It’s hard to know what’s more laughably outrageous — the notion that lawmakers would underfund schools and toss this minuscule crumb in the first place or that they would then go on to brag about it as some kind of real achievement. Whichever the case, it’s clear that: a) state leaders continue to treat North Carolina school teachers as so many disposable units and b) the cynicism surrounding their miserly and shortsighted policy decisions knows few bounds.

NC Budget and Tax Center

The budget passed by state lawmakers last week expanded the sales tax base to include additional services that are not currently taxed. Accordingly, the repair or upkeep of a vehicle, the repair of a broken washer or dryer, or the maintenance of an air conditioning unit will now be subject to the sales tax.

It appears that the weekend gave policymakers time for some second thoughts about their plan, however. This week, state lawmakers are now aiming to pass a bill that will roll back one particular aspect of the sales tax base expansion included in the budget.

House Bill 117 (HB 117) includes a provision that would exempt repair, maintenance, and installation services on tangible property and motor vehicles covered under manufacturer or dealer warranties from the sales tax. Accordingly, under HB 117, if your vehicle or tangible property is covered under a warranty then you don’t pay a sales tax on repair and upkeep services. To the contrary, if your vehicle or other tangible property is not covered under a manufacturer or dealer warranty then you will pay more in sales taxes.

This tax change means that two people can own similar tangible property, but one could potentially end up paying more in sales taxes simply because they don’t have a manufacturer or dealer warranty. This is troubling because it is likely to particularly harm low-income taxpayers who already pay a larger share of their income in taxes compared to the well-off. Low-income taxpayers who have to take their non-warranted vehicle to an auto shop for an unexpected repair will pay more in sales taxes, for example. Meanwhile, those who are able to afford costly warranties will escape having to pay more in sales taxes.

The backtracking on services included in the sales tax base expansion contradicts state lawmakers’ supposed commitment to base broadening on principle. Broadening the sales tax base has been sold as a way to make the state’s tax code more effective and ensure that it reflects a more service-oriented economy. That appears to be the case only if powerful lobbyists don’t object. Read More

NC Budget and Tax Center

Many pundits and outlets are describing the joint budget deal as a “compromise” between the inadequate House and Senate budgets. But North Carolinians from Murphy to Manteo know that we cannot compromise our future.

By pursuing deeper tax cuts, policymakers have failed to strengthen public education, public health, and safety, and the other building blocks of a strong economy.

The new tax plan will lose $383.6 million over a two-year period, with the annual loss ballooning to $692.9 million by the fifth year. Revenue losses will grow by another $458 million over the next two years when accounting for corporate tax breaks that are already scheduled to go into effect. All of these revenue losses will add to the damage from the 2013 tax cuts, which result in $1 billion in lost revenue each year when fully implemented.

That’s why it’s no surprise that there are a lot of investments in vital public services that are needed but missing from the new budget deal, like public education, public health and safety, and rural economic development. There has been plenty of coverage of what is in the budget over the last day and a half but there has been little coverage of what’s not in the budget.

Below is a short list of investments that are missing in action but still greatly needed to build a stronger, more inclusive economy for us all. Read More

NC Budget and Tax Center

Yesterday, legislative leadership unveiled a joint budget deal that puts the train on the wrong tracks by pursuing deeper tax cuts at the expense of strengthening public education, public health and safety, and the other building blocks of a strong economy. The deal includes another costly round of income tax cuts, additional tax breaks for selected industries, and an expansion in the sales tax base to include installation, repair, and maintenance services. The tax plan will lose $383.6 million over a two-year period, with the annual loss ballooning to $692.9 million in by the fifth year.

The state Senate is scheduled to give preliminary approval of the 500-plus page deal at 2pm today and final approval tomorrow, despite its 11:30pm release last evening. The House is expected to vote on the deal as early as Thursday, with it headed to the Governor’s desk after a final vote. The stop-gap spending measure that is currently in place expires Friday at midnight and would need to be extended for a fourth time if a final budget deal is not in place by then.

While most of the public budget debate this week will be on the spending side, examining how lawmakers pay for the budget deal is just as important. This is especially true due to this new round of costly tax cuts that come on top of the $1 billion annual tax cuts approved two years ago. Both tax plans drain resources that otherwise could have been used to build opportunity and replace the worst cuts enacted since the economic downturn. Read More

NC Budget and Tax Center

We still don’t know exactly what kind of tax and budget deal will emerge from the legislature when it wraps up business in the coming weeks, but it will likely include another round of tax cuts for large multi-state corporations. We’ve also seen an alarming push to bake further tax reductions and spending limits into the state constitution, called TABOR, which would constitutionally mandate policy that we’ve never even tested through regular legislation, and which has been a proven failure in Colorado. Against this backdrop, remember that there is no evidence that tax cuts can solve the economic challenges that we face.

Tax cuts have not improved North Carolina wages. Now that we have recovered from the worst of the Great Recession, many economists see a lack of wage growth our most pressing economic challenge. Wages in North Carolina are even more stagnate than for the US as a whole, a problem that has not been solved by tax cuts over the last few years. The average hourly wage in North Carolina is now roughly $3 less than the national average, a gap that has actually widened since the first major round of recent tax cuts passed in 2013. Tax cuts have not solved our wage problem, and there’s no reason to expect that change.

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