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Sound fiscal policy choices needed to build a stronger, more inclusive NC economy

This post concludes a series on the state budget [1] featuring the voices of North Carolina experts on what our state needs to progress so that all North Carolinians have a fair shot to get ahead.

State lawmakers will return to Raleigh next week to convene this year’s short legislative session. One primary task for lawmakers is to revisit the state budget for the upcoming fiscal year that begins in July and make needed and desired revisions. More tax changes may also be pursued, which would have implications on what the final state budget looks like and whether spending priorities to meet growing needs can be met.

raise the bar [2]

The desire for more income tax cuts by state leaders would build onto tax changes passed in recent years that have largely benefited the wealthiest in the state and that have significantly reduced revenue available for public investments.

A recently released BTC report [3] highlights the tax swap that has resulted from recent tax changes. Costly income tax cuts have given tax breaks to the wealthiest and profitable corporations. Meanwhile, the sales tax has been expanded to include more goods and services, which particularly harms families and individuals that struggle to make ends meet. Consequently, this tax swap – a greater reliance on sales tax and less on income taxes – has shifted the tax responsibility to low- and middle income taxpayers and away from the well-off. Since 2013, the tax burden on low income taxpayers has increased by $30 on average while it has decreased by around $15,000 on average for millionaires.

The significant revenue loss from the tax cuts cannot be overlooked. The annual revenue loss once all tax changes are fully in place is at least $2 billion. These are dollars that otherwise would be available for the economy-boosting public investments that have been lifted up in the Raise the Bar blog series [1] this week – investments such as reducing persistent Pre-K waiting lists, ensuring that public schools have adequate resources, making higher education more affordable, ensuring healthcare services for the elderly and poor, and helping ensure that economic growth extends to rural and distressed communities across the state.

The results are clear: Even as the tax swap delivers big tax breaks to the wealthy, it reduces resources available for public investments that build a strong economy. North Carolinians should be alarmed by state leaders’ short-sighted focus on tax cuts and their desire to continue North Carolina down this path. Sound fiscal policy choices are needed to build a stronger, more inclusive economy and a brighter future that all Tar Heels want and deserve. It is this vision of building an economy that works for everyone that should guide lawmakers’ decisions during the upcoming legislative session.