Commentary, Education, Legislature, NC Budget and Tax Center, News

Budget & Tax Center: Another cut for big business that will reduce revenue for schools, communities

N.C. Senate finance leaders are moving a tax cut bill for businesses with high net worth this week, even as the legislature has failed to put forward a comprehensive investment plan addressing the priorities of communities across the state.

That’s right. There is no final, comprehensive budget for our communities, but legislative leaders in the Senate will still give tax breaks to big companies.

Senate Bill 578 will adopt the franchise tax cuts proposed in the legislative budget at a time when corporations across North Carolina are paying the lowest corporate income tax rate applied to their profits in any state that taxes corporate income.

As the Budget & Tax Center detailed in an earlier analysis, this is not a tax cut that will reach the majority of businesses in North Carolina, and like corporate income tax cuts before it, it is unlikely to change the decisions of businesses around hiring or location.

There are numerous rigorous studies of the issue to confirm that the theory behind such claims hasn’t played out in reality: Businesses aren’t going to relocate en masse because of a franchise tax cut.  This makes sense given what researchers have noted as the real-world problems with suggesting that a tax cut for business will deliver new economic activity.

  1. When businesses get a tax cut, particularly at the state level, that means that other people will have to pay in the form of higher taxes or spending cuts. Balancing out the net effect on the economy has led most researchers to conclude that even new economic activity doesn’t replace those dollars or minimize the harm of the tax shifts and spending cuts that result from the loss of revenue.
  2. All state and local taxes paid are a very small share of businesses’ total expenses, estimated at between 2 and 4 percent. That means even substantial tax cuts will have little effect on profitability.
  3. Relocation decisions are rare and not the primary source of job creation in a state. And most researchers have found that relocation decisions are more likely driven by proximity to markets or suppliers, quality of roads and transportation networks and availability of workers, for example.

Perhaps the most pernicious false claim around this and all tax debates in North Carolina is that tax cuts will generate more revenue by driving greater economic activity.

The reality, of course, is North Carolina will have less revenue because legislative leaders chose to cut franchise taxes for companies, particularly companies with net worth over $20 million from which most franchise taxes are collected.

The legislature’s Fiscal Research office estimates the franchise tax provision will reduce revenue by $240 million in the first year, and grow to $270 million in Fiscal Year 2023-24.

Those dollars could make significant progress toward pressing needs for everyday North Carolinians by:

  • Making child care more affordable
  • Investing in affordable housing development
  • Supporting home health care and services for the state’s older population
  • Monitoring the quality of our air and water and the level of regulation needed to more adequately protect against toxic dumping

North Carolina leaders have not prioritized these pressing needs for North Carolinians in their piecemeal budget approach, but they appear certain to continue to deliver a piece to big companies.

Alexandra Forter Sirota is the director of the N.C. Justice Center’s Budget & Tax Center.  

Environment, Governor Roy Cooper, Legislature

Governor’s office agrees to allow employees to publicly answer lawmakers’ questions about Atlantic Coast Pipeline

The segments in red indicate where construction on the pipeline was to begin in 2018; construction scheduled for 2019 along the segment is in blue. Legal challenges have halted the $8 billion project co-owned primarily by Duke Energy and Dominion. (Map: Atlantic Coast Pipeline)

Employees from Gov. Roy Cooper’s office soon could publicly testify before lawmakers about details of a voluntary $57.8 million mitigation fund involving the controversial Atlantic Coast Pipeline.

The employees could appear before a subcommittee as early as the week of Nov. 4.

If built, the ACP would started at a fracked natural gas operation in West Virginia, traverse through Virginia and enter North Carolina in Northampton County before continuing 160 miles through the eastern part of the state. Tens of thousands of people oppose the project because it would harm waterways, wildlife habitats and air quality, as well as raise environmental justice issues. Many of the communities along the route are largely Black or American Indian, and low-income. 

These pipelines also leak methane, a potent greenhouse gas and major driver of climate change.

In January 2018, Cooper announced his office had brokered a deal that would require Dominion and Duke Energy, the majority co-owners of the natural gas project, to pay into a mitigation fund to help renewable energy and economic development projects in eastern North Carolina.

With two hours of the governor’s announcement, the state Department of Environmental Quality released a statement saying it had granted a key water quality permit that would allow the project to proceed. DEQ had delayed issuing the permit, known as a 401, for several months as it requested more information from Duke and Dominion.

The timing of the two announcements raised suspicions from some lawmakers and ACP opponents — who are rarely on the same side — that the permit approval was contingent upon the $57.8 million fund. Both DEQ and Gov. Cooper have repeatedly denied their respective offices coordinated such an arrangement.

Virginia cut a similar deal, but it was between state environmental regulators and the utilities; it was also binding.

North Carolina lawmakers subsequently hired Eagle Intel, an independent firm composed of former IRS investigators, to look into how the deal was struck.

Last Friday, un an acrimonious exchange of letters, Republicans Sen. Harry Brown and Rep. Dean Arp complained that the governor had instructed some employees “not to cooperate” with Eagle Intel.  Brown and Arp offered to allow the employees to answer questions from the Subcommittee on the Atlantic Coast Pipeline about the governor’s “participation in the ACP permitting process,” as well as inquiries regarding the fund between the executive branch, the solar industry and Duke Energy.

Kristi Jones, the governor’s chief of staff, responded that employees would answer lawmakers’ questions, but only publicly, and not privately, as lawmakers had originally requested. “The fact you intend to inquire about the propriety of the funds paid by Duke is hypocritical at best, given that you have already appropriated those funds. Clearly, you did not believe a mitigation fund was inappropriate. You simply want to control it.”

When Republicans had veto-proof control of both the House and Senate, lawmakers passed legislation redirecting the funds to public school districts along the ACP route. However, no funds have been disbursed because they are to be apportioned in stages, including when the pipeline begins operating.  Legal challenges have halted construction for nearly a year. Recently the US Supreme Court has agreed to hear an appeal from the utilities, which are contesting a federal appellate court decision to revoke a US Forest Service permit allowing it to cross the Appalachian Trail.

 



Letter From Arp Brown on ACP Investigators Hearing (Text)



Letter From KristiJones to Arp Brown (Text)

Commentary, Legislature

Polygraph or not, no one’s buying the GOP story on the General Assembly’s veto override

N.C. House Speaker Tim Moore

If, perhaps, you listened to Speaker Tim Moore’s recent telling of the events of Sept. 11, 2019, and mistakenly believed that it was Republicans — and not the minority party Democrats — bushwhacked by that morning’s veto override vote, you could be forgiven.

Both parties have attempted, in the dismal hours and days after Republicans made off with their budget plunder, to provide a compelling narrative. Of course, this is what politicians do.

And, of course, House Democratic Leader Darren Jackson’s polygraph challenge to Moore Monday is a sideshow, but it’s a sideshow to the circus Moore oversaw on Sept. 11. In that circus, Moore is the carnival barker.

From Joe Killian’s report Monday on Jackson and Moore’s dueling monologues:

“House Republican leadership lied about the session on the morning of September 11,” Jackson said Monday. “They have continued to lie about it since. This dishonesty not only impacts the state budget, which obviously is a big deal, but it has impacted how the entire institution of our state House functions.”

Since the surprise vote to override Gov. Roy Cooper’s budget veto in the state House on September 11, Republicans and Democrats have fought continuously over the narrative of that morning.

Democratic leadership says they were told there would be no votes that morning. Republican leaders say they made no such promise. Democrats say Republicans planned a “sneak attack” to override Gov. Roy Cooper. Republicans said they were surprised few Democrats were present at the Sept. 11 session and simply took advantage of it when they realized they had enough votes to win an override vote they had postponed for months.

Jackson said he recently took a polygraph test — commonly known as a lie detector test — to establish that his version of events is true.

Jackson maintains he was told by Republican leadership there would be no vote that morning, something Rep. David Lewis also communicated to WRAL reporter Laura Leslie.

“I think people want to believe in their government,” Jackson said. “They want to believe their representatives don’t lie.”

Jackson provided his own polygraph results to reporters Monday.

At a reply press conference shortly after Jackson’s, Moore dismissed the idea of a polygraph test as “theatrics.”

“Look, this isn’t the Maury Povich show,” Moore said. “This is state government.”

Moore said he and Jackson are both attorneys and know that while used in investigations, polygraphs aren’t admissible in court.

“I don’t plan to get in the gutter with Rep. Jackson and play silly games,” Moore said.

House Democratic Leader Darren Jackson

If this was, in fact, Maury Povich’s daytime talk show, often associated with paternity test melodrama, we’ll have to borrow Maury’s line: Speaker Moore and the Republican majority, you are NOT the fairly elected majority.

Because, gerrymandering.

Whoever’s story you’re buying — and there are compelling reasons to approach the GOP chain of events with extraordinary skepticism — take time first to consider the truly injured party instead.

It’s not the Democrats or the Republicans. It’s not the lobbyists. It’s not the bureaucrats. It’s not the media. And it’s certainly not Speaker Moore.

It is the North Carolina public, which might not expect professionalism in the N.C. General Assembly, but deserves it nonetheless.

It is the North Carolina public, which will be deeply impacted by the budget conflicts over education and health care that this month’s override in the state House so casually papered over.

It is the North Carolina public, which should, at the minimum, trust its government, but has little reason to do so.

Environment, Legislature

House committee OKs $100m for Hurricane Florence relief; Dorian price tag still unknown

North Topsail Beach, two days before Hurricane Dorian hit the coast (Photo: Lisa Sorg)

The House Appropriations Committee approved a major disaster relief bill today that includes $5 million for the state to recover from “future events,” but the top emergency management official said that amount won’t be enough.

“It’s a placeholder,” said Mike Sprayberry, director of the Division of Emergency Management. “It’s an estimate to take action now.”

With major hurricanes now becoming routine in North Carolina, he said, “we’ll likely come back to the legislature for more.”

There will likely be another disaster relief bill to account for the damage from Hurricane Dorian, which devastated the Outer Banks last week.

About a quarter of the $100 million is earmarked for grants to local governments for a variety of storm damage repairs from Hurricane Florence, which occurred a year ago: County courthouses, creek dredging, building demolition and wastewater treatment plants.

Greensboro also would receive $1 million for recovery projects related to a tornado outbreak that slammed the city in April 2018.

The Department of Environmental Quality would receive $22.7 million. About a third would be used for shoring up disaster-related infrastructure, such as water and wastewater treatment plants; coastal management planning and dam safety.

DEQ’s Coastal Mitigation Fund would receive $11.5 million for grants to local governments. However, the provision’s language is expected to be clarified. Rep. Pricey Harrison, a Guilford County Democrat, said she was concerned that the grants could be used for hardened structures, such as terminal groins, along the coastline. Hardened structures can harm aquatic life and habitats; nor do they last as long as “living shorelines” –– those that use natural materials for protection.

Rep. Chuck McGrady, a Republican from Henderson County, agreed, saying that hardened structures should not be installed “under the guise of disaster relief.”

The Division of Emergency Management would receive $2 million to develop a pilot program to help pay for the cost of up to two years’ worth of flood insurance for eligible applicants and  properties in distressed areas.

Applicants can earn no more than 80 percent of the area median income during the preceding calendar year; the property must be the applicant’s primary residence, is insurable, and has “experienced a repetitive loss” as defined by FEMA.

Harrison noted that in some coastal areas the median income is high, which could circumvent the intent of the legislation: to help low-income households get flood insurance. Harrison suggested pegging the income eligibility to the federal poverty threshold.

For example, in Sunset Beach the median annual household income is nearly $57,000, above the state median of $50,000. Thirty-seven percent of the 1,851 households earn more than $75,000 a year, according to census figures. Just 4.3 percent live at or below the federal poverty threshold.

McGrady said only primary residences would be eligible for flood insurance help. “This is an incentive for people to get flood insurance, not to subsidize their vacation homes.”

North Carolina has sustained billions of dollars in losses from four hurricanes in the past three years: Matthew in 2016, Florence and Michael in 2018, and now Dorian — with about two more months of hurricane season remaining.

These losses have prompted some academics, urban planners and even coastal officials to consider buyouts of particularly vulnerable properties. About $8 million would be funneled to the State Acquisition and Relocation Fund, which provides gap funding for buyouts and to move families out of flood plains.

However, the bill contains no appropriations to pay for additional buyouts of swine farms in the flood plain. Although there have been five rounds of buyouts since 1999, more than 100 farms and their open-pit waste lagoons still lie within a 100-year flood plain; even more remain in the 500-year flood plain.

Agriculture Commissioner Steve Troxler told lawmakers earlier this year that he opposes further buyouts unless existing farms can either expand or move to new locations — currently prohibited under the state’s 20-year moratorium.

A 100-year flood plain means that there is a 1 percent chance in any given year that the area will flood. A 500-year flood plain is defined as an area where there is a 0.2 percent chance of an annual flood event.

 



Disaster Relief Bill (Text)

Commentary, Courts & the Law, Education, Legislature, News

The week’s top stories on Policy Watch

1. In historic ruling, judges strike down North Carolina’s gerrymandered legislative maps

North Carolina voters may have a front row seat over the next two weeks to watch Republican lawmakers correct their redistricting wrong of using extreme partisan gerrymandering to dilute Democrats’ collective voting strength and to entrench their own political party in power.

A panel of three Superior Court judges unanimously struck down 2017 House and Senate maps in a 357-page ruling Tuesday, giving lawmakers two weeks, until Sept. 18, to draw new districts in “full public view” without the use of election data.

They wrote in their ruling that the 2017 House and Senate districts challenged in Common Cause v. Lewis were “significantly tainted in that they unconstitutionally deprive every citizen of the right to elections for members of the General Assembly conducted freely and honestly to ascertain, fairly and truthfully, the will of the People.” [Read more…]

Bonus read: First redistricting committee meeting set for Monday after court orders new districts

2. Dan Forest to headline Charlotte event featuring controversial religious right speakers


Lt. Governor to share the stage with speakers who have vilified LGBTQ and Muslim communities, called for plan to “free Christian children from public education.”

Next month, Lt. Gov. Dan Forest will be the special guest at The American Renewal Project’s “North Carolina Renewal Project” event in Charlotte. The roster of speakers for the private conservative Christian event includes:

A pastor who calls the notion of a separation between church and state “cowardice” and those in the movement for lesbian, gay, bisexual and transgender equality “militant homofascists” bent on turning the U.S. into Sodom.
An author who has railed against Muslims as would-be conquerors and rapists and LGBTQ rights as a first step to America living under Sharia law.
A pastor and Republican politician who has asserted anyone not committed to the U.S. as an explicitly Judeo-Christian nation should leave.[Read more…]

3. Burr, Tillis keep quiet as volume rises in gun control debate

WASHINGTON — Democrats are angling to put gun control at the center of the debate when lawmakers return to Capitol Hill next week, but so far, North Carolina’s senators have stayed relatively quiet on the issue.

After a summer marked by multiple mass shootings across the United States, gun control is gaining more traction in Congress, even among some traditionally reluctant Republicans.

The House Judiciary Committee is slated to debate three gun control proposals next week, and House Democratic leadership has called for immediate action on the issue. Meanwhile, Walmart announced this week it would no longer sell ammunition for assault weapons.[Read more...]

4. The Right’s silly and simplistic attacks on “socialism”

Ever since Vermont Senator Bernie Sanders launched his first campaign for the presidency in 2015, America has found itself immersed in a renewed debate over the concept of “socialism.”

This is, of course, not a new discussion. The word itself goes back at least to the 19th Century and many of the ideas associated with it can be traced to the beginning of human history. What’s more, the “socialist” label has been embraced, attacked, defined and understood by countless leaders, thinkers, activists and political movements in myriad ways.

Today, Sanders may describe himself as a proponent of “democratic socialism,” but what the senator has in mind when he uses such a term clearly bears little resemblance to what many others who have used the “socialist” label were seeking to promote – be they the sclerotic autocrats of the late 20th Century Soviet bloc, the leaders of numerous Third World revolutionary movements, or even the far right “National Socialists” of Nazi Germany and today’s “Heil Trump,” white supremacist movement.[Read more…]

5. To buy out or rebuild? Hurricane Dorian shines a spotlight on the future of NC’s low-lying coast

Forty-eight hours before the arms of Hurricane Dorian locked on the coast, North Topsail Beach in Onslow County sounded like an untuned symphony. The roar of the ocean lay down a musical bed for the shrieks of seagulls, a concussion of hammers and the caterwauls of power saws.

Dozens of homes along and near the oceanfront were already boarded up, their inhabitants headed inland. Stragglers were folding their beach towels, collecting a few more seashells and abandoning their sand castles.“I’m going to hightail it out of here pretty soon,” said one man, scrambling toward the sea to soak in the final minutes of a long holiday.

The hundreds of homes along New River Inlet Road are among the most vulnerable to sea level rise and beach erosion on North Carolina’s southeast coast, according to coastal geologist Rob Young. A report, published by Young and the Program for Developed Shorelines at Western Carolina University, recommends a targeted buyout of many of these oceanfront homes, which are on “first line” of tropical storm exposure on the U.S. East and Gulf Coasts.

“There are very few buyouts on barrier islands,” Young told a crowd at a coastal resiliency summit in Havelock in June, where he previewed portions of the report. “But it’s a sensible solution.” [Read more…]

6. Another year, another monster storm: Our leaders must act on climate change

I was almost 16 years old in August 1998, when Hurricane Bonnie – traveling at a sluggish six miles per hour, about the speed of a brisk jog – cut up the North Carolina coastline. But my memories of the night it chewed up my hometown are indelible.

The pine trees bent and broke, the power transformer on the corner gave off a mechanical cough and exploded with a shower of incandescent sparks, and the house – which I’d had no call to question the fidelity of before that day – seemed to groan.

How swiftly that heady pre-storm mixture of glee and anticipation – summoned, of course, by school closures and a break in the late summer monotony – turned to fear. [Read more…]

7. North Carolina students show modest gains on the latest round of state tests

North Carolina schools posted modest gains on state tests. More schools met or exceeded growth targets and more schools earned A and B performance grades, according to the state’s annual accountability report released Wednesday by the State Board of Education.

The state’s graduation rate was 86.5 percent, which is a slight improvement over last year’s 86.3 percent rate.

“We are making changes in Raleigh to help our students and teachers – with less time spent on testing and more time for instruction, getting money out of Raleigh and into classrooms where it belongs, and a regional support system better tailored to support schools,” State Superintendent Mark Johnson said.

The percentage of third-graders reading at or above grade level was 56.8 percent for the 2018-19 school year compared to 56.3 percent the previous year.[Read more…]

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