North Carolina ain’t broke (financially), so now let’s fix it – New revenue data show NCGA has a choice: help people or corporations?

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North Carolina has the funds to invest in a just recovery. An updated assessment of state revenues shows collections have come in stronger than previously expected over the past year and continued growth should provide some of the resources needed to dig out of the COVID-19 hole. 

First the numbers. North Carolina is on track to collect $29.5 billion in revenue for the current fiscal year and is projected to see modest revenue increase in each of the next two years. That means the state should have almost $5.6 billion more this year to fight the effects of the pandemic than came in during the last fiscal year. That could be great news for people and communities still struggling to rebuild from COVID-19, but it depends on whether the legislature chooses to direct resources to where the need is the greatest. With the state $7 billion a year short of what we have historically invested in the people of North Carolina, this jump in collections won’t get us to where we need to be, but it could be a start. 

So how did we get here?  

Some of it was federal aid preventing another Great Depression, some is corporations and high-income people having a good financial year, and some is due to the timing of when revenues actually came in. 

First, federal aid headed off what could have been worse than the Great Depression. What could have been a recession of nearly unimaginable proportions was tempered as supplemental unemployment benefits, stimulus checks, and other aid created a safety net for many North Carolinians. When the pandemic arrived in North Carolina, most people rightfully worried state revenues would shrink dramatically. But that was before the federal government stepped in with several rounds of financial assistance for people and businesses. Federal aid hasn’t addressed all of the need, but it provided a vital backstop that kept people in their homes, food on the table, and the lights on. Aid for families also helped to prop up, personal income and sales tax collections increased during COVID-19, instead of revenues falling off a cliff. The most recent round of aid passed is partially responsible for the state’s financial outlook improving even since the last forecast was released in February before the historic American Rescue Plan was passed. 

At the same time, a lot of big corporations and well-healed tar heels had a very good financial year. Many big corporations posted record profits over the last year, which drove up corporate and franchise tax payments. The figures just released expect corporate and franchise collections to jump by more than a billion dollars, an increase of more than 75% compared to the last fiscal year.  

Finally, some of the jump in collections is rooted in one-time changes which impacted when revenues were actually collected. The filing deadline for personal income taxes was delayed, so some of the revenues which would have come in during the last fiscal year showed up during the current one. Second, North Carolina started collecting sales taxes on many online sales, so sales tax collections jumped significantly, pushed even further by people shopping online during the pandemic. 

So where do we go from here?  

The choice is pretty clear. Either we invest in rebuilding a more just North Carolina or continue lining the pockets of rich people and big businesses. 

Some legislative leaders would love to divert more state resources into corporate balance sheets and wealthy shareholders’ bank accounts. The Senate recently moved to eliminate the corporate income tax entirely without really doing anything to help the families and businesses which have born the brunt of the pandemic. That bill still has not become law, so there is time to head off this most recent attempt to funnel funds into the deepest pockets. 

Now that we know the state isn’t going broke, its time for a real recovery plan. Far too many North Carolinians still face barriers returning to the workforce, covering the cost of basic necessities, and the financial fallout from COVID-19 has been the most dramatic for many low-income workers, people of color, and women.  

The question now is what leaders in Raleigh will choose to do. Will we see another windfall for profitable corporations and wealthy people, or a down payment on a just recovery. Justice and economic imperative point in the same direction – invest our public funds in building a better future. 

Patrick McHugh is the research director for the nonpartisan N.C. Budget & Tax Center. Mel Umbarger contributed to this post.

Lost jobs in January highlight the importance of the federal rescue plan

Preliminary labor market figures for January underscore why the American Rescue Plan signed into law last week was so vitally needed. After months of slow recovery and a holiday spike in COVID-19 cases, North Carolina lost over 3,000 jobs in January, a clear sign our recovery is far from complete.

The relief plan provides the kind of support at scale needed to turn toward a more just and inclusive recovery. Months of half steps had seriously hampered the pace of recovery in the latter part of 2020, so it’s encouraging to see our elected representatives enacting the kind of bold rescue plan families across North Carolina so desperately need.

Economic challenges facing North Carolina include: 

  • Recovery has slowed dramatically in recent months: North Carolina added fewer than 30,000 jobs in the final quarter of 2020 after recovering over 230,000 jobs in May and June. All told, one-third of the jobs lost since the start of the recession have not been recovered, and North Carolina still needs to add nearly 195,000 jobs to get back to where we were before COVID-19.

  • Recession is over for most highly paid North Carolinians while still devastating low-income workers. While not captured in the headline unemployment figures, job losses have fallen the hardest on North Carolinians with the least financial cushion. Data through mid-January show high paying jobs with annual wages over $60,000 have fully recovered. While the recession is effectively over for many people in good-paying jobs, nearly one quarter of the jobs that paid below $27,000 before the recession are still missing.
  • Job losses are heavily concentrated in some industries, particularly among worst-paid workers: The COVID-19 recession has devastated workers in some industries, while others have almost fully recovered. The largest persistent job losses since February of last year have occurred in industries like Accommodation and Food Service (-68,300), Government (-38,100), Manufacturing (-18,300), Health Care and Social Assistance (22,000), Arts, Entertainment and Recreation (19,500), and Education Services (15,300).

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COVID-19 pandemic continues to devastate the incomes of low-wage workers

For many well-off North Carolinians, however, the recession ended long ago

Almost a year on after the arrival of COVID-19, hundreds of thousands of our state’s worst-paid workers still can’t find a job even as the recession is effectively over for some of the high-wage industries in North Carolina.

Anyone who’s been paying any attention knows COVID-19 is creating outsized suffering for low-wage workers, women, and people of color, but the magnitude of the economic disconnect is still often under-appreciated. In two short months from February to April of last year, nearly 270,000 leisure and hospitality jobs (roughly half of the positions in North Carolina) vanished. Most of the people who were put out of work had been getting paid meager wages and had little financial cushion to fall back on. A long history of occupational segregation and barriers to lucrative careers also meant women and people of color were particularly likely to have their livelihoods disappear.

On the other end of the wage scale, North Carolinians working in finance, business services, technology, and other white collar positions saw their daily lives upended, but many were able to shift to working remotely and most kept pulling down good paychecks. Even at the worst of the recession, 9 out of every 10 professional and business services workers were still on the job, and only 3% of people in finance were out of work

As different as the immediate impacts were, the divide is in many ways even more dramatic today. The recession was effectively over for the best paid North Carolinians by the later part of 2020, but our worst-paid workers are still stuck in a devastating economic hole. By the end of last year, all of the jobs lost to COVID-19 in Professional and Business Services had been recovered while one-fifth of the pre-pandemic jobs (117,500) in leisure and hospitality are still missing.

Patrick McHugh is the Research Manager for the N.C. Budget & Tax Center.

Carrying the torch: Today’s fight for justice is built on generations of struggle in NC

Horror and heroism often walk side-by-side. For every insurrectionist who attacked the U.S. Capitol last month, many more lifted their voices against racism and police violence in streets across our country. For every leader sowing false doubts about the 2020 results, droves of dedicated election workers tended to an honest vote. Amid every tweet downplaying the ravages of COVID-19, millions of American workers put their lives on the line every day to keep our society afloat.

The past year was hardly the first time the angels and demons of the human spirit have fought for the soul of our country. In this time of trial, it’s all the more vital to take strength from the examples of our forebearers, to remember we are the inheritors of a proud tradition of not taking injustice lying down, and that every right we enjoy emerged from intense struggle.

As we carry on the fight for justice, here are a few reminders of why it matters, and the heroes whose torch we have now in our hands.

The Hamlet Fire and a system of “cheap”

One of the worst workplace disasters in recent North Carolina memory happened in 1991, in the small town of Hamlet, when the Imperial Foods chicken processing plant went up in flames, killing 25 workers who were locked inside. Author Bryant Simon spent years trying to understand how the Hamlet fire happened, and what it reveals what he calls a “system of cheap” — a political and economic system that puts workers’ lives in peril, even in normal times, and becomes even the more deadly during times of crisis like COVID-19.

This conversation reflects on what we can learn from the Hamlet fire, how policy choices have shaped reality during COVID-19, and what we can do to truly value working peoples’ lives going forward.

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Legacy of white supremacy continues to create barriers for workers, especially during COVID-19

Black History Month could just as easily be called “American present February.” Nothing in the U.S. is ancient history. Someone who will graduate college this year at age 23 has been alive for nearly 10% of U.S. history, and anyone lucky enough to reach 80 has personally witnessed one-third of the American experience. The presence of the past is particularly plain to see during COVID-19. The mold of the past year was shaped by generations of social and economic policy that layered the burden of COVID-19 most heavily on communities of color.

As a small part of reckoning with our history and celebrating the lives of Black people who have struggled for justice, we’re releasing a few resources over the next few weeks that can be food for thought and reflection.

An overview of what each includes is provided below, but here’s how to skip straight to the resources themselves:

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