NC Budget and Tax Center

Now is the time to rebalance the state’s unemployment insurance system

New research from The Century Foundation released today finds that the recovery of Unemployment Insurance Trust Funds nationwide presents an opportunity to rebalance the approach taken during the Great Recession and its aftermath.

The approach taken in several states, including North Carolina, included significant changes that reduce the weekly unemployment insurance amount, the duration of weeks and limited eligibility across a range of other measures.

Given the opportunity of the ongoing economic expansion, states are able now to ensure that the Unemployment Insurance system is well-positioned to serve its role in stabilizing the economy during a downturn.  Doing so will require ensuring that the weekly benefit amounts achieve an adequate level of wage replacement, that the weeks available ensure workers can find new jobs or be retrained (as is increasingly necessary) for new careers, for example.

Here are the core findings from the report: Read more

NC Budget and Tax Center

Growing the deficit will lead to immediate cuts to core programs in our communities

Congress follows several deficit-control mechanisms that govern tax and spending decisions in any given year to ensure that the deficit does not increase and spending is arbitrarily constrained.

PAYGO, funding caps and are all in play now that the House and Senate have both voted to grow the deficit by at least $1.4 trillion over the next decade.

Since the tax changes proposed would drive multi-year deficits, they must be offset by the equivalent amount according to the 2010 Statutory Pay As You Go Act (PAYGO).  As the Congressional Budget Office reported before the Senate vote, the Senate Tax plan will trigger automatic cuts to Medicare that would total $25 billion, as well as many other programs including those supporting farms and rural investment and student loans.  See this helpful visual to see the range of programs that could be affected by PAYGO with a Congressional vote to grow the deficit.

Funding caps and sequestration — across-the board and automatic cuts — would also likely be required in the next year.  Despite efforts to lessen the harm of this flawed approach to budgeting in 2013, 2014 and 2015, it is unlikely that there will be the will to take the same approach in 2018, particularly after lawmakers in Congress have voted to grow the deficit.  The result will be accelerating further the historic decline in spending on education, health care, economic development and housing.

For a helpful overview of these statutory deficit-control mechanisms, see this piece by the Center on Budget & Policy Priorities.

NC Budget and Tax Center

Statement on U.S. Senate Tax Plan from Alexandra Sirota, Budget & Tax Center Director

The tax plan, passed today out of committee, now moves to the U.S. Senate floor. It will deliver the greatest benefit to the rich, raise taxes on many middle- and low-income taxpayers, and grow the federal deficit.  The harm to North Carolina will be felt in every community as an estimated 400,000 North Carolinians lose health insurance and investments are cut that connect people to jobs, connect businesses to markets, and strengthen our economy.  North Carolina’s Congressional delegation must slow down their rush to pass an overhaul of the tax code that benefits so few and ensure that federal tax policy is not paving the way for more harm to our state. 

NC Budget and Tax Center

Senate tax plan would eliminate health insurance coverage for millions to pay for tax cuts for richest Americans

The Senate tax bill released last week follows the same framework proposed by the U.S. House and the Trump Administration: delivering large tax cuts to the richest Americans while paving the way for cuts to schools, health care and the infrastructure that helps communities thrive.

Now, in what is perhaps the most disturbing recent development, Senate leaders have added a more explicit attack on the health care of at least 13 million Americans by placing a proposed repeal the individual mandate in the tax bill.

This is from the Center on Budget & Policy Priorities:

“The savings from eliminating the mandate would come entirely from reducing health coverage. For example, the federal government would spend less on premium tax credits because fewer people would sign up for marketplace coverage, less on Medicaid because fewer people would enroll, and less on the tax exclusion for employer-sponsored health insurance because fewer employees would enroll in job-based coverage.

These savings are what let Senate leaders make their full corporate rate cut permanent. Without repeal of the individual mandate, the long-term costs of the corporate rate cut ($171 billion in 2027 alone) would have exceeded the savings from the bill’s offsetting revenue raisers, even after Senate Republicans modified their bill to have its individual income tax cuts expire after 2025. This math problem seems to have been a key part of the motivation for adding individual mandate repeal to the bill. With savings of $53 billion in 2027, the provision pays for making about one-third (about 4.7 percentage points) of the corporate rate cut permanent. Other provisions in the bill would cover the rest of the cost.”

Late yesterday, the national AARP issued the following statement:

“The amendment to repeal the individual health coverage requirement will leave millions of Americans uninsured, destabilize the health insurance market, and lead to spikes in the cost of premiums.

The Congressional Budget Office recently confirmed that repealing the individual health coverage requirement would lead to 13 million Americans losing their health coverage, including 2 million Americans who would lose employer-sponsored coverage.

AARP urges Congress to reject this amendment, which also undermines the bipartisan health bill offered last month by Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) that is intended to reduce premium spikes and stabilize the individual health insurance market.”

This is a developing story — stay tuned for updates.

NC Budget and Tax Center

Economic experts slay arguments for tax cuts

Economists with the Economic Policy Institute recently released a concise but well-resourced guide that responds to some major questions that often arise when policymakers turn to tax cuts to solve our economic challenges.

Here’s the report’s bottom line answer to the question of whether tax cuts should be a priority for policymakers:

“Tax cuts provide no durable solution to any genuine economic problem for America’s working families, but do make some genuine problems even worse.”

Check out the full piece here.

And then turn to the latest analysis from Josh Bivens of the Economic Policy Institute showing that real-world data finds no wage boost from corporate tax rate cuts.

Federal policymakers should heed the evidence, as should North Carolina policymakers who have continued to reduce the state’s corporate income tax since 2013 so that it is now the lowest in the nation. Real-world data in NC: Median wages are still below where they were when the national economic recovery began.