Commentary, NC Budget and Tax Center

New county data reveal the growing gap between NC’s top 1% and everyone else

Alexandra Sirota of the NC Budget and Tax Center has a new entry in the BTC’s Prosperity Watch series:

The New Gilded Age in NC: The gap between top 1% and everyone else is growing

North Carolina’s economic recovery has not only failed to reach many communities, the income gains that have occurred have accrued to those at the very top of the income distribution — further growing inequality across the state.

As researchers note in a new report from the Economic Policy Institute, income inequality is not an inevitable outcome of economic growth but is tied to the policy choices that guide who benefits from growth that does occur and by how much. Furthermore, income inequality puts at risk the attainment of various important economic and social goals, including the potential for longer growth, improved well-being, and economic mobility.

This unique county level analysis measured income inequality between the top 1 percent and bottom 99 percent to show that communities across the country have experienced rising income inequality since 2010.

The data for North Carolina is startling. From 2010 to 2015, in 28 of North Carolina’s 100 counties, the top 1 percent captured a greater share of the income growth than that captured by the bottom 99 percent.

The difference in income between the top 1 percent and the bottom 99 percent is greatest in urban areas. In the state’s urban counties, the top 1 percent have incomes that are 23 times that of the bottom 99 percent, whereas in the state’s rural counties that ratio is 14 times that of the bottom 99 percent.

As the map shows, 12 counties saw the incomes of the bottom 99 percent of residents decline and 42 counties have ratios where the top 1 percent had incomes 15 times or higher than the bottom 99 percent.  In 14 counties, the top 1 percent have more than 20 times the income of the bottom 99 percent — Mecklenburg (31.2), Macon (26.7), Iredell (26.1), Forsyth (25.2), Guilford (24.9), Alleghany (24.8), Orange (24.6), Union (22.7), New Hanover (22.6), Lenoir (21.5), Montgomery (21.2), Chowan (20.3), Buncombe (20.1) and Pitt (20.1) — thereby performing worse than the national average of this ratio.

Here is a table of county income inequality from the Sommelier and Price research. 

 

NC Budget and Tax Center

New census data: High poverty rates persist in NC despite modest growth

The latest from the N.C. Budget and Tax Center:

Last year, 1.47 million North Carolinians lived in poverty and struggled to make ends meet, according to new data released today from the U.S. Census Bureau. People and communities across the state still face barriers to getting ahead such as lack of access to good-paying jobs, unaffordable childcare, little access to public transportation to get to work, and inadequate education and job training resources.

Despite low rates of unemployment and improving GDP, far too many North Carolinians are being left out of the state’s economic recovery. In fact, 2017 marked the 10th year that poverty has failed to fall below pre-recession levels. In 2017, 14.7 percent of North Carolinians lived in poverty, living on less than $25,100 a year for a family of four. More than 1 in 5 kids in North Carolina are growing up in families that can’t give them a good start to in life because they are paid wages too low to afford the basics.

“Regardless of signs of economic growth, far too many North Carolina families still struggle to afford the basics,” said Brian Kennedy II, Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center. “The fact that we’ve failed to drop below pre-recession levels after a decade of recovery is an indication of growing inequality and poor policy choices.”

The new Census data show that North Carolina’s families are still dealing with high rates of poverty, stagnant incomes, and widespread income inequality:

  • North Carolina’s poverty rate is 1.3 percentage points higher than the U.S. poverty rate, and it has the 14th highest poverty rate in the nation, including Washington, D.C.
  • The state poverty rate (14.7 percent) declined by less than one percentage point over the past year and remains just slightly higher than 2007, before the Great Recession hit.
  • The state’s median income ($52,752) increased by $2,168 from 2016. Despite this increase, the typical North Carolina household still makes $189 less today than in 2007, meaning there has no progress in raising middle class living standards for the average North Carolinian since the beginning of the Great Recession.
  • 6.5 percent of North Carolinians live in extreme poverty, which means they live below less than half of the poverty line—or about $12,500 a year for a family of four.

The data also show that poverty continues to hit some groups harder:

  • Communities of color face significant barriers in our state, including lack of access to quality education, housing segregation, and discrimination. The result is that they are more likely to struggle economically than whites. For example, in North Carolina, 22 percent of African Americans live below the official poverty line ($25,100 for a family of 4) compared with 10.6 percent of whites. Also, 27.1 percent of Latinx North Carolinians, 25.4 of American Indians, and 12.2 percent of Asian Americans live in poverty. This means that many aren’t sharing in our economic gains or able to fully contribute to the economic health of our community.
  • Children continue to experience higher rates of poverty than adults. In 2017, 21.2 percent, or 1 in 5 children, lived in poverty compared to 9.1 percent of adults aged 65 and older.
  • Women face higher poverty rates than men, 16 percent compared to 13.3 percent, respectively.

“Addressing poverty through proven policies that connect people to good jobs and reduce the harmful effects of hardship can boost our economy and improve the well-being of our state,” adds Kennedy.

NC Budget and Tax Center

As we gear up for another storm, N.C. is still facing the effects of Hurricane Matthew

Alamance Community Park, in Robeson County, near Lumberton, NC, remained inundated with flood waters on Oct. 16, 2016. Floodwater from Hurricane Matthew came to the bottom edge of the park signs when the storm first hit. USDA Photo by Lance Cheung.

Alamance Community Park, in Robeson County, near Lumberton, NC, remained inundated with flood waters on Oct. 16, 2016. USDA Photo by Lance Cheung.

As the state prepares for the imminent Hurricane Florence, let’s not forget those who are still facing the impacts from the catastrophic aftermath of Hurricane Matthew. On Oct. 8, 2016, Hurricane Matthew hit North Carolina, resulting in major flooding and property damage that affected more than 50 counties. With $2.8 billion in damages and $2 billion in economic impairment, the storm resulted in an estimated loss of 800,000 homes, 300,000 businesses, the displacement of 3,744 residents, and closures in 34 school systems.

As of October 2017, a year after Matthew hit eastern North Carolina, the state had received $396 million in federal recovery funding and about $385 million in state recovery funding — leaving $450-$500 million in unmet needs for affected North Carolina communities. As we near the two-year mark, life for many in eastern North Carolina has not returned back to normal, and this impending storm will serve an even bigger blow to their livelihoods.

North Carolina has historically not invested enough to ensure all North Carolinians have the ability to thrive. Although our policy makers set aside a Rainy Day Fund to assist in times of disaster, the aftermath of Hurricane Matthew made it clear they are not willing to adequately disperse the savings when our communities need it most. In learning from past mistakes, we need to push for policy makers to make wiser infrastructure investments in our schools, roads, and other public services and programs. We need to also ensure they begin to develop a comprehensive approach to protection, management, and preparedness during times of disaster that aid in the immediate and long term needs of our communities. As Hurricane Florence approaches, we must remind ourselves of the importance of working together to ensure our lawmakers are committed to the overall goal of making a more equitable North Carolina.

Chanae Wilson is an Engagement Coordinator with the Budget & Tax Center, a project of the NC Justice Center. 

Education, NC Budget and Tax Center

Income tax rate cap amendment would cement N.C.’s missed opportunity in education

Imposing an arbitrary income tax rate cap in the North Carolina Constitution could fundamentally compromise our state’s ability to fund our schools, ensure the educational preparation of young children, and boost the educational attainment of our workforce.

Such a cementing of a missed opportunity in education could happen as the tax load shifts even further onto middle- and low-income taxpayers, while the state’s highest income taxpayers, the top 1 percent, continue to benefit from recent tax changes since 2013.

In the Budget & Tax Center’s report on the costs of a proposal to lower the maximum tax rate allowed on incomes, we find that by cutting off the potential for top brackets on high-income earners, North Carolina will not have $2.4 billion available to meet unmet needs.

These needs are real in classrooms across the state and for families with children in every community.

  • Per pupil spending remains below pre-Recession levels – 25 percent lower than South Carolina.
  • The teacher pay penalty in N.C. is second worst in the nation, behind only Arizona.
  • Students are learning in buildings with mold and leaking roofs.
  • Students are lacking access to the tools that support their learning — technology and textbooks — and their well-being — school nurses, counselors and food.

With $2.4 billion, North Carolina could address these needs and help every child reach their full potential.  Failing to do so puts at risk our constitutional commitment to public education.

Alexandra Sirota is the Director of the Budget & Tax Center, a project of the NC Justice Center. 

NC Budget and Tax Center

3 things we learned from the Elon poll about the income tax amendment

At this stage in the election cycle and in a state where so many changes to the state Constitution are being proposed at once, it’s not surprising that voters don’t have all the information they need to make an informed decision on ballot measures.

That may be the headline of news coverage of the recent Elon poll, but here are three key findings on the income tax rate cap amendment that should be capturing more attention.

  1. Voters don’t support this amendment when they hear the official explanation of what it is. The opposition to the change in the proposed income tax rate moves from 15 percent to 27 percent after hearing the details of what the amendment will do.   Support falls below the majority needed to change the state constitution.
  2. Voters aren’t going to the polls because the income tax cap rate cap is on the ballot. One of the theories discussed during the legislative process was that legislative leaders felt that this measure needed to be on there to turn out voters.  Fifty-seven percent of those polled said this proposed change doesn’t motivate them to go to the polls.
  3. Voters understand that it won’t affect their tax rate. The language of the amendment was changed in the last days of the legislature to include in the ballot question language that the amendment “reduces taxes,” even though the effect of the proposal would only be to cap the maximum allowable rate in the state constitution ABOVE where it currently is.

The takeaway from the Elon poll should certainly be that more education and information is needed to ensure voters can make an informed choice at the ballot.

It should also be clear that North Carolina voters aren’t fooled by tricks from legislative leaders.  They won’t be tricked into going to the polls. They won’t be tricked by language that obscures the benefits to the wealthy and the harm to their communities. They won’t be tricked into thinking that they will benefit.

As we detail in our recent analysis of the proposal to cap the income tax rate at a lower maximum rate, this is a costly measure for North Carolina taxpayers and communities.