>>By Tazra Mitchell, NC Budget and Tax Center The North Carolina Senate passed their budget just past mid-night, in the wee hours of this morning. The Senate budget puts into clear perspective the high price ordinary North Carolinians will have to pay for last year’s tax cuts that primarily benefit the wealthy and profitable corporations. Despite progress in some areas, the proposal leaves too many vital public services operating at diminished levels—failing to catch up with the needs of kids, working families, and communities five years into the official economic recovery. Our overview of the Senate budget can be read here.
State spending under the Senate budget would be 6 percent, or $1.4 billion, below the last budget that was enacted before the Great Recession, adjusting for inflation. Yet, there are more students to educate, citizens to serve and protect, and older adults to help care for.
Due to tax changes enacted last year, budget writers are now dealing with the consequences of a self-imposed budget challenge. State lawmakers created a structural deficit in which revenues are falling short of what is needed to meet critical needs across budget areas. The state is facing a revenue shortfall of $191 million in the 2015 fiscal year (not to be confused with the nearly half-a-billion shortfall for the current 2014 fiscal year that ends in June).
The driver of these revenue shortfalls—despite an economic recovery—is the series of tax cuts that lawmakers approved and Governor McCrory signed into law last year that will drain available revenues to the tune of $437.8 million in the 2015 fiscal year. As we reported earlier this month, estimates suggest that the revenue losses from the tax plan, particularly stemming from the personal income tax changes, could reach $600 million in next fiscal year.
It is important to put these revenue losses into the context of foregone public investments that are the building blocks of a strong economy, as the table below does. It is also important to remember that better options exist. In the short term, lawmakers should halt the future tax cuts that are scheduled to go into effect in January 2015.
This article has been reposted with permission from the NC Budget and Tax Center.