NC Budget and Tax Center

On taxes there is a different set of rules that helps the rich, but not the working class

Tax revenues support public investments and therefore are the cornerstones of effective public structures and prosperous communities. In order for our tax structure to work it must be fair across income levels and tax enforcement must be applied consistently. Unfortunately that is not the case as it is clear that when it comes to taxes the richest use a different set of rules while the working class continues to lose.

A new investigation by the New York Times has found that “President Trump participated in dubious tax schemes during the 1990s, including instances of outright fraud, that greatly increased the fortune he received from his parents.”

Here are some of the key findings of this investigation:

  • “President Trump received at least $413 million in today’s dollars from his father’s real estate empire, much of it through tax dodges in the 1990s”
  • “The president’s parents, Fred and Mary Trump, transferred well over $1 billion in wealth to their children, which could have produced a tax bill of at least $550 million under the 55 percent tax rate then imposed on gifts and inheritances. However, the Trumps paid a total of $52.2 million, or about 5 percent, tax records show.”
  • “In the late 1940s, Fred Trump obtained roughly $26 million in federal loans to build two of his largest developments. Records obtained by The Times reveal how he began to build or buy apartment buildings in Brooklyn and Queens and then gradually, without public trace, transfer ownership to his children through a web of partnerships and corporations.”

Findings like this must be called out and a statement by the Institute of Taxation and Economic Policy (ITEP) does exactly that by bluntly stating:

“The key takeaway from the New York Times article on Donald Trump’s family’s tax shenanigans is that the wealthy and powerful abide by a different set of rules than the rest of us. Not only does the tax system allow the wealthy to take advantage of legal loopholes, it also allows them to blur the line between legal avoidance and illegal tax evasion with little consequence.”

“Wealthy Americans should not be able to play by a different set of rules and avoid or evade their fair share of taxes. We need to reform the tax system to close the loopholes the wealthy use to avoid taxes and substantially increase funding to the IRS to ensure that the laws we do have are robustly enforced.”

Overall, these latest findings of how the richest are not paying their fair share and how the tax system consolidates their wealthy year after year are very concerning, especially considering that the federal tax law passed last year rigs the rules in favor of the rich even more. Indeed, President Trump pushed for a federal tax law last year that provides 50 percent of the benefits to the wealthiest 5 percent of Americans.

This law also provided a break that favors the wealthy as it doubled the amount of assets that can be left to heirs without triggering the estate tax from $11 million for a married couple to $22 million. Even prior to passage of the new law, only 0.2 percent of estates were taxed, which means reducing the estate tax only benefited the very wealthiest families even more. Furthermore, it is well established that recent tax code changes have provided major corporations with generous tax cuts.

As a country we must ensure everyone in America, regardless of their income level, has a good chance to succeed and thrive, because that is when our country is at its best. Having a different set of rules that simply helps the rich avoid accountability goes against that and sends the wrong message about what is right.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Proposed Federal Tax Cut 2.0 will not help North Carolinians. Here are three things to know

What is happening?

Under the heading “Tax Reform 2.0,” the House Ways and Means Committee has introduced new proposed legislation that follows the federal tax plan that was passed into law by President Trump late last year. The proposed Tax Cut 2.0 would permanently preserve a number of provisions that went into effect in 2018 and are currently scheduled to “sunset” after 2025.

The House is expected to begin the voting process as early as next week (September 24).

Why is this concerning?

The Congressional Joint Committee on Taxation estimates the bill “Protecting Family and Small Business Tax Cuts Act of 2018,” would reduce federal revenue by $631 billion in the next decade (2019-2028) and an additional $3.15 trillion between 2029-2038. Furthermore, this proposed second round of GOP tax cuts would add $3.8 trillion to the federal deficit over the next two decades, according to a report released  by the Urban-Brookings Tax Policy Center.

In other words, the proposed federal tax cut 2.0 would mean a further cost shift to the states and paves the way for even more significant reductions in the federal programs and services that ensure the economy is functioning efficiently and effectively, and that more people are connected to opportunities.

What happened last time?

The last time Congress rushed a federal tax plan was last year when in 2 months it rushed a tax law at a cost of $1.9 trillion over the next ten years. As a result our country’s tax code has now been changed in a way that benefits wealthy taxpayers and foreign investors while asking more from low and middle-income taxpayers. In North Carolina the richest top 5 percent received half of the total tax cut benefits. Meanwhile, the poorest 20 percent only received 1 percent of the benefits.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

North Carolina’s physical and nutritional health has worsened since 2008

[Note: As we explained earlier this summer in a post entitled “North Carolina needs help to meet strategic health objectives by 2020,” North Carolina is at real risk of failing to meet a series of objectives identified in 2010 as part of the “Healthy NC 2020” initiative. This post is part of a summer series that is providing in-depth coverage of some of the focus areas in which we are falling short.]

In 2010, the state of North Carolina identified 13 major health focus areas and established 41 health objectives and targets to meet by the year 2020. As part of the state’s ‘Healthy NC 2020’ improvement plan, the state identified a ‘Physical Activity and Nutrition’ focus area and developed four measurable objectives for it, recognizing that this area is an essential part of individual health throughout one’s lifespan.

Unfortunately, analysis of new data shows that North Carolina has not made any progress on two of its physical and nutrition health objectives since 2008. Today, more high school students are overweight or obese, and fewer adults are now eating at least one fruit a day. In other words, North Carolina’s physical and nutritional health in these areas has only gotten worse since 2008. Meanwhile, there has been very little change when it comes to adults consuming vegetables and meeting national aerobic recommendations.

Moreover, along with our state’s worsening of physical and nutritional health conditions, analysis also shows that, since 2008, funding for the state’s Division of Public Health has been cut by 27.7 percent, or $59.9 million. This is concerning considering that this division is responsible for promoting and contributing to the highest possible level of health for the people of North Carolina.

Achieving our state’s physical activity and nutritional health goals should be a top priority if we are serious about making North Carolina “one of the healthiest states in the nation.” If North Carolina does not make progress in this area, it will pose significant health concerns for not only children and adults, but also for future generations. “Excess weight increases an individual’s risk of developing type 2 diabetes, high blood pressure, heart disease, certain cancers, and stroke,” according to the state. Increased physical activity and improved nutrition are among the many factors that can help individuals reach and maintain a healthy weight and improve mental health.

Given the facts and the importance of public health, our legislature should focus on effectively promoting the common sense physical and nutritional public policies that were proposed almost a decade ago, as our ‘Healthy NC 2020’ plan states:

Require schools to offer high-quality physical education and healthy foods and beverages; require schools to implement evidence-based healthful living curricula in schools; fund Eat Smart, Move More community-wide obesity prevention plans; provide community grants to promote physical activity and healthy eating; support community efforts to build active living communities; provide tax incentives to encourage comprehensive worksite wellness programs; and provide funding to support school-based and school-linked health services and achieve a statewide ratio of 1 school nurse for every 750 middle and high school students.”

 Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Report: North Carolina’s latest state budget fails to effectively address N.C.’s existing and emerging needs

The NC Budget & Tax Center has released a report explaining the 2019 state budget that was passed this year by the state legislature and begins by pointing out North Carolina lawmakers approved a state budget “that falls short of helping all North Carolinians live healthy, prosperous lives.”

The report explains that the new $23.9 billion budget does not promote a long-term vision for an inclusive state, as it continues to under-invest in areas of great public need and doesn’t take into account upcoming federal budget cuts.

According to the report:

“The final budget that lawmakers enacted continues to limit a collective commitment to North Carolina, increasing spending by $881.7 million over 2018. To put that figure in perspective, this means that the final budget is just 1 percent above pre-Recession levels, despite the state’s population growth over that same period of 11 percent.”

The latest NC Budget & Tax Center report points out, among other things:

  • Total state spending for fiscal year 2019 marks 10 consecutive years that state spending has declined as a share of the state’s economy
  • Lawmakers left $561 million unappropriated
  • The legislature’s decision to leave in place tax choices from 2017 means roughly $3.5 billion less in revenue each year to fund community and voter priorities like protecting children from abuse, building healthy schools, serving seniors meals, protecting our water and air, and training the future workforce
  • Over two-thirds (71 percent) of new investments in the 2019 fiscal year budget are made up of ‘one-time’ funds, or non-recurring money

The report also explains that Governor Cooper and the legislature offered different visions for North Carolina in their 2019 budgets and provides a visual recap of their different tax and spending choices. Moreover, the report compares current funding to 2008 levels in various critical areas and answers relevant questions such as:

  • What percentage of the state budget goes to each core area (e.g., education, health & human services, public safety)?
  • Which agencies received the most one-time funding?
  • How much more would NC’s public schools need to receive to be funded at the same percentage as in 1970?
  • How much, on average, have Civil and Criminal Court costs & fees increased since 2008?

To find out the answers to these questions and see more graphs that explain our state’s 2019 budget you can access the latest NC Budget & Tax Center report here.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center, public health

Medicaid and Medicare mark 53rd anniversary by continuing to serve millions of North Carolinians today

Medicaid and Medicare were signed into law on July 30, 1965 – exactly 53 years ago this week.

President Lyndon Johnson signs the Medicare and Medicaid Bill (July 30, 1965). LBJ Library photo

Since these programs were created, they have given millions of people access to a doctor so they can maintain their health. Over the long-term, these programs have provided significant returns on investment, such as benefiting children into adulthood by lowering disability rates and increasing their earning income potential. Today, these two healthcare programs are worth celebrating and expanding even further as they continue to serve millions of Americans and North Carolinians each day.

In North Carolina, 2.3 million people receive comprehensive, affordable health coverage through Medicaid. Medicaid provides health coverage to low-income families and individuals, including children, parents, pregnant women, seniors, and people with disabilities. Meanwhile, 1.8 million North Carolinians (18 percent of the population) are served by Medicare, which serves people over 65, younger people with disabilities, and dialysis patients.

At a time when some lawmakers in Congress and in our state’s General Assembly minimize the value of these critical healthcare programs and limit their potential, it is important to celebrate the 53rd anniversary of Medicaid and Medicare and recognize that their continued evolvement have helped transform the lives of millions of people in positive ways. In recognition of their 53rd anniversary, here are five facts and three charts that provide a quick glimpse into their reach, structure and impact.

Fact 1: North Carolina’s health insurance gap coverage gap needs to be closed: In 2016, North Carolina had the 9th-highest uninsured rate (16.2%) in the nation for ages 18-64. This is above the national average of 12.4 percent.

Fact 2: North Carolina’s legislature has rejected Medicaid expansion since 2013: If North Carolina expands Medicaid, over 600,000 more people in the state would receive healthcare coverage and $4 billion would be added to our state’s economy annually.

Fact 3: Medicaid is funded jointly by the federal government and the states: In North Carolina, the federal government pays for 66 percent of Medicaid’s costs, and the state pays the remaining 34 percent, resulting in a 2:1 federal “match.”

Fact 4: The Medicaid system is efficient: For every dollar spent on Medicaid, 94 cents is spent directly on health services. Furthermore, Medicaid’s costs increased at about one-fourth the rate of private insurance since 2007.

Fact 5: Women comprise 55 percent of Medicare beneficiaries in North Carolina: The average age of a Medicare beneficiary in our state is 71. In 2016, 1.5 million seniors and 321,600 people with disabilities in North Carolina were Medicare beneficiaries.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.