NC Budget and Tax Center

Fiscal note only partially accounts for millions that photo ID amendment will cost N.C.

Yesterday, the fiscal note for the latest version of voter photo ID legislation was posted to the North Carolina General Assembly website. The memo is only able to address some of the costs that this new barrier to voting will create, and even this partial accounting shows that it will cost North Carolina millions to solve a non-existent problem. If experiences in other states are any guide, the real cost to governments and citizens is likely to be much higher, and will divert resources from addressing real barriers facing the voting public.

The total official estimates for the cost to state taxpayers of erecting new barriers to voting is between $4 million and $3 million annually, assuming that only 3 new state employees can successfully educate all of our local board about one of the most complex changes to our election process in state history, with no estimate for local Boards of Election charged with the majority of implementation, plus the loss of $3 million annually to the Department of Motor Vehicles for processing and providing identification without a fee.  The memo also does not address many of the costs to local governments and Boards of Elections, litigation costs that will almost certainly arise from legal challenges to this legislation, meaning that the real cost to taxpayers is likely to be substantially higher.

These conservative estimates from the Fiscal Research Division are consistent with partial cost estimates produced by the NC Budget & Tax Center in September. Based on experiences in other states and data obtained on the number of North Carolinians who may require new forms of identification, the direct cost of implementation could easily be $9 million. Adding another $3 million in costs to defend this law against legal challenges, and the total cost to state and local governments could reach $12 million.

There is good reason to believe that the real costs to state and local taxpayers will be even higher than either of these recent estimates indicate. Several costly features of the current legislation are extremely difficult to estimate accurately, including:  the printing and processing of provisional ballots, the maintenance and administration of the law by county Boards of Election, the administration of providing information to the public about the photo ID requirement,  and the potential legal requirement to provide no fee supporting documents for those without identification to secure one. Read more

Commentary, NC Budget and Tax Center

Voter ID bill likely to cost the state millions

The North Carolina Senate has now passed (and the House will soon take up) a bill that would mandate and set the terms for the new state constitutional requirement mandating a photo ID for in-person voting. Unfortunately, the debate has not yet been informed by a fiscal note that outlines what taxpayers will have to pay to implement a bill that will disproportionately exclude Black and brown voters from the electoral process, and create new barriers to voting for voters who live on fixed incomes and in poverty.

The current version of the bill notes the procedure by which a voter will present proof of identity at a polling location, along with a list of the types and categories of photo identification that could be accepted. It is unclear in the bill language, however, just how county boards of elections will fund guaranteed access to no-cost photo identification that complies with the constitutional amendment. Even with the guarantee of no-cost voter identification, a Budget and Tax Center analysis conducted this fall, found that the costs to individuals in securing supporting documents, travel and wait times, and the resultant lost wages could force eligible voters to choose between securing voter identification and paying for groceries, medicine, childcare, and other necessities.

A fiscal note, outlining the cost of the implementation of the bill, is crucial to providing a realistic understanding of the costs to all North Carolina taxpayers and the trade-offs that policymakers will make when other priorities that expand opportunity are unfunded.  Our analysis drew from special data requests to agencies about the costs of educating voters, staffing poll locations and DMV offices, and conducting voter education and outreach to find that the potential costs to the state could be $9 million. As analysts have pointed out, based on the litigation costs to defend the last iteration of North Carolina’s voter ID law ruled unconstitutional by the courts, at least an additional $3 million could easily be spent to defend this bill. Given this data and what we know about the costs in other states of such unnecessary requirements, we approximated a conservative estimate of the cost of this bill to North Carolina taxpayers at $12 million.

At a time when the state budget has failed to meet real community needs, it is important that legislators weigh the costs of erecting barriers to voting for some, against the need to build pathways to opportunity through good quality public schools, health services, and economic development for all. Let’s hope the state House takes such action when it commences consideration of the bill next week.

NC Budget and Tax Center

State and local tax policies can advance or block racial equity. How is N.C. doing?

In a major report released today by the Center on Budget & Policy Priorities, researchers present a review of tax policy choices that have historically blocked opportunities for people of color and the ongoing challenge of assuming that tax policy is “race-neutral.”

The findings are particularly important for North Carolina.  Our state gets a mention in the report for recent tax cuts that have fueled the racial divide in our state.  Beyond that, North Carolina has failed to heed the lessons of our history—designing tax policy with the wealthy and white in mind rather than with the possibilities of connecting more people to the wealth-building potential of a good education, affordable home, reliable and quality health care, and thriving communities.

Indeed, of the three major recommendations from the report below, North Carolina has almost completely failed.

  • Strengthen State Tax Structure: Ensure that households with high incomes pay a larger share of their income in state and local taxes than households with lower incomes — the opposite of the upside-down tax systems in place in 9 of every 10 states today. Most states’ tax structures actually worsen racial and ethnic inequities because the tax structures are regressive and households of color are more likely to have lower incomes and less wealth than white households.
  • Raise Revenue to Invest in Overcoming Inequities: Raise sufficient revenue for high-quality schools in all communities and for other investments in education, infrastructure, health, and the like, and target spending to help overcome racial and ethnic inequities and build an economy whose benefits are more widely shared.
  • Improve the “rules of the game”: Improve the fiscal policy “rules of the game” so lawmakers don’t face artificial constraints that prevent them from raising more revenue from wealthier residents or to finance public investments that can promote broadly shared prosperity.

Notably, the recent passage of a state constitutional amendment in N.C. that caps the income tax rate at 7 percent places an arbitrary barrier that prevents progress toward advancing racial equity and the potential to boost North Carolina’s economy.

However, North Carolina policymakers still have many tools that they can and should pursue to advance the shared goal of expanding economic opportunity and an enhancing equity; this includes aligning the state tax code with ability to pay; adequately and equitably funding core services such as schools and health to connect Black, brown and white households to opportunity; and removing artificial constraints on tax and spending decisions such as the recent practice by legislative leaders of arbitrarily constraining spending and leaving needs unmet.

You can read the full report here.

NC Budget and Tax Center

Still have questions about the income tax amendment on the ballot?

Today is Election Day, and many in North Carolina are still unaware or confused about the six proposed amendments to the NC constitution that are currently on the ballot. Below are some of the questions the Budget & Tax Center has most often encountered during this election season.

What is the proposed income tax cap amendment?

During the most recent legislative session, North Carolina lawmakers approved a bill to change the North Carolina Constitution to place a cap on the maximum allowable rate of personal and corporate income tax. Because this bill requires a change to the NC Constitution, the question now goes to voters. If voters approve this amendment on Election Day 2018, the personal and corporate income tax rate in North Carolina will be permanently capped at 7% as opposed to the current 10% income tax cap.

Will this income tax cap put money back into my pocket after the November vote?

The proposed income tax cap amendment is not a tax cut, and will not ensure you pay less in taxes overall. The amendment proposes to permanently cap the income tax rate at a maximum allowable rate of 7%. Currently, North Carolinians pay a 5.499% rate of individual income tax, and a 3% rate of corporate income tax. Therefore, folks in North Carolina cannot expect a tax cut as a result of this tax cap amendment. In fact, if income tax is capped at 7%, sales and property taxes will likely be increased in the future.

Who stands to benefit the most from this proposed tax cap?

This amendment makes permanent some of the recent tax changes that benefit the richest North Carolinians, increasing concern that middle and low-income individuals will foot the bill. Previously, and for some time, North Carolina had a graduated tax structure that required the richest of us to pay a higher rate of personal income tax. From 2001-2006 the rates paid by the richest North Carolinians were above 7%.

Income tax is the largest source of tax revenue in our state, and provides needed dollars for crucial infrastructure and services like education, public health, public safety, and parks and libraries. In order to respond to future economic crises and ensure continued funding for these services, future lawmakers will likely be forced to raise sales and local property taxes to make up for the loss in income tax revenue. Because sales and property taxes are not applied depending on a person’s income, low and middle income North Carolinians pay a larger share of their incomes toward those taxes.

Is there currently an income tax cap in North Carolina, or can my income taxes be raised without limit?

The maximum income tax rate is already capped at 10%. Your income taxes cannot currently be raised beyond that rate.

Have other states capped income taxes? What happened?

In 2014, Georgia changed the state constitution and placed a cap on its top income tax rate. The income tax cap has cut off a major source of funding to address classroom and student needs across the state of Georgia, limiting the ability of current and future lawmakers to utilize its income tax to ensure that its public schools have adequate resources for the more than 1.7 million students in its public schools.

For more information about the potential impact of the tax cap, please read the Budget & Tax Center’s recent report. For general information related to November’s election, please visit www.ncjustice.org/election2018.

Heba Atwa is a Policy Advocate for the Budget & Tax Center, a project of the NC Justice Center.

NC Budget and Tax Center

Data confirm that conservative claims about tax cuts and the NC economy are bogus

In case you missed it on Tuesday, check out the latest installment in the Prosperity Watch series from N.C. Budget and Tax Center economist Dr. Patrick McHugh, “Tax cuts for the exceptionally wealthy have produced unexceptional results“:

Official data show that North Carolina’s economic performance has been at or below that of many of our neighbor states in the Southeast over the past several years, directly undermining claims that cutting state tax rates would spur faster growth. Proponents of tax cuts for wealthy individuals and large corporations that started taking effect in January 2014 argued that these policy changes would propel North Carolina past our neighbors, but the evidence shows that this has failed to occur. North Carolina’s rate of employment growth has lagged behind several of our neighbors in the Southeast, and has been virtually indistinguishable from the average for the South Atlantic region.

When tax cuts that were passed in 2013 began taking effect in the 2014 tax year, North Carolina had already been experiencing a slow recovery from the Great Recession for several years. That trend of growth has continued since, but once national and regional trends are taken into account, there is virtually no evidence that tax cuts improved North Carolina’s economic fortunes. From January of 2014, when North Carolina tax cuts started phasing in, to September of this year, employment in North Carolina has expanded by 10.03 percent, basically identical to the 10.36 percent rate of growth for the South Atlantic region more broadly. The Southeast has generally grown slightly faster than the 8.69 percent national average rate of job growth over that period, but that difference is clearly driven by regional trends such as faster than average population growth and industry shifts that are not specific to North Carolina.

While North Carolina has been consistent with the rate of job growth across much of the Southeast, its performance has lagged markedly behind several states in the region. Employment in Florida expanded by 14.85 percent since January of 2014, and Georgia also surpassed North Carolina’s record with employment growth of 12 percent. South Carolina’s 9.58 percent employment expansion trailed North Carolina, but only slightly.

The lack of exceptional job growth is particularly concerning given that North Carolina has not generated enough jobs since the Great Recession to keep up with its growing population. North Carolina’s population has expanded by 17.6 percent since the start of the recession, but employment has only increased by 8.2 percent, leaving a big gap between the need for employment and the number of jobs on offer. In fact, North Carolina would need 392,900 more jobs than exist today to return to pre-recession levels of employment.

All of these data indicate that tax cuts aimed at wealthy individuals and profitable corporations have failed to address North Carolina’s economic needs. Employment growth has remained at or below many of our regional peers, and the pace of job creation has not kept up with the demands of a growing population.