NC JUSTICE NEWS, August 24, 2010: Federal and State Tax Policy, Attacks on Health Reform, and Defenders of Justice
FEDERAL TAX POLICY: Why the estate tax is a good thing
Last week, we explained why continuing the enhancements to tax breaks for low-income working families—in particular, improvements to the Earned Income Tax Credit and the Child Tax Credit—is critical to fueling the economic recovery and helping families avoid bankruptcy and foreclosure. We also covered how letting the Bush-era tax cuts for the wealthiest Americans expire will decrease future deficits and improve the nation's long-term fiscal picture. (For full analysis of how these measures will impact North Carolina's families and economy, read the new report from the NC Budget & Tax Center.)
But there's one other tax measure Congress will have to consider when members return to DC next month. During the previous administration, Congress and the president implemented a gradual repeal of the federal estate tax. Under current law, the now-expired estate tax is set to return in January to Clinton-era levels with a per-person exemption of $1 million. The debate now underway is over whether Congress should bring the estate tax back in 2011 at 2009 levels, with a per-person exemption of $3.5 million, or kill it permanently.
At the 2009 level, fewer than one in 500 estates would pay any estate tax in 2011, and the average effective tax rate would be only 19 percent. This modest tax has a big impact on federal and state revenues—killing it would cost nearly $300 billion during the first ten years, compared to going back to 2009 levels.
Congress enacted the estate tax in 1916 in the midst of unprecedented concentration of wealth among the country's richest families and individuals—a dangerous and economically damaging trend that has returned in dramatic fashion over the past decade. Ensuring that the rich return some of their wealth to the system that helped make them wealthy is fair and sensible tax policy.
- NC Justice Center: BTC Reports - Federal Tax Policy to Promote Broad Prosperity: Will major tax policy decisions this fall encourage or impede progress toward renewed prosperity?
- Citizens for Tax Justice: More polls show majority want tax cuts for the rich to expire, more analysts confirm that it won't hurt the economy
- Charlotte Observer: As economy lags, CBO adds fuel to debate on tax breaks
HEALTH CARE: Amendment takes aim at provision of reform law
Another measure Congress will be voting on next month takes aim at the health reform law. That's the new tactic of reform opponents—tag amendents onto other laws that dismantle major parts of the legislation.
The amendment from Senator Mike Johanns (R-NE) is attached to small business legislation. It would repeal a provision of the health reform law designed to raise revenue by reducing noncompliance with the nation’s tax laws. And it offsets the large revenue loss by taking away $11 billion from preventive health services and weakening the health law’s mandate that people purchase insurance before they get sick, a change that would drive up health premiums for everyone.
We won the health reform battle, but the war is still raging.
- Center on Budget and Policy Priorities: Johanns amendment to small business bill would raise health insurance premiums, increase the ranks of the uninsured, and eliminate preventive health funding
- Progressive Pulse: Fixing the new health law versus dismantling it
UNEMPLOYMENT: New numbers look a little better, but...
The latest state unemployment numbers came out last week, and the news is dire. Yes, the unemployment rate dropped from 10% to 9.8% in July. But North Carolina's workers are dropping out of the labor force at a rate greater than the national rate. Those workers are not included in the unemployment numbers because they are not looking for jobs—they have simply given up. Moreover, North Carolina's job shortfall—the number of jobs needed to keep pace with the growth in the working age population and replace jobs lost—grew this month to reach more than 425,000 jobs.
Job preservation and creation must be the primary goal of state and federal policymakers if North Carolina is to achieve a full economic recovery. Extending funding for the Temporary Assistance to Needy Families Emergency Fund, which provides for investment in local, mostly private-sector jobs, is one important measure for creating jobs that Congress will consider this fall. In addition, the recently passed federal fiscal assistance to states ($300 million for North Carolina) will mean some state and local employees, including thousands of teachers, may soon get their jobs back.
- NC Justice Center: Media Release - Slight drop in state unemployment masks dangerous trends
- Charlotte Observer: Jobless rate falls below 10%
State Senator Joe Sam Queen of Waynesville for his commitment to increasing the availability of affordable housing and providing assistance to working families
State Representative Garland E. Pierce of Scotland County for his continuing efforts to ensure the needs and interests of North Carolina’s poor families are represented in the state legislature
Kay Zwan of Wilmington for her passionate advocacy for increased access to health care and her efforts to increase public support for national health reform
Jane Wettach of Duke University’s Children’s Education Law Clinic for her work to ensure students at risk of failing or being excluded from school get the quality education to which they have a right
Great Schools in Wake for being a strong voice in opposition to the resegregation of Wake County schools and for quality education for all Wake students
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CRIMINAL JUSTICE: Why North Carolina needs to stop killing people
An audit of the State Bureau of Investigation released last week found 230 criminal cases from 1987 to 2003 in which SBI agents filed reports about blood evidence that were at least incomplete and at most down-right deceptive. In 190 of the cases, the two former FBI agents who conducted the audit said "information that may have been material and even favorable to the defense of an accused defendant was withheld or misrepresented," possibly in violation of state and federal laws that require the state to turn over important evidence to the defense. Three cases in which the SBI lab withheld blood test results were death penalty cases, and those inmates have already been executed. There's no way to know right now if those three men were actually innocent, but it is certainly fair to say the State of North Carolina put them to death after denying them fair trials.
No one knows how many more trials were distorted by false testimony of lab experts working closely with prosecutors. As the News & Observer pointed out Thursday, the blood analysis unit is just one of six sections of the lab. The paper's series uncovered serious questions about the ballistics unit too, though no review of that or any other section is in the works.
There is a long list of reforms that must come out of this indictment of the state's system of justice, and one of them is the end of the death penalty in North Carolina. The system is too broken. Even if it's "fixed" we can never be sure that human error or intentional deceit by a rogue agent or lab expert won't subvert justice again. It's a gamble we can no longer afford to take.
- NC Policy Watch: SBI audit points to one obvious reform
- Raleigh News & Observer: Agents' Secrets - Junk science, tainted testimony at SBI
STATE TAX POLICY: New report takes a look at itemized deductions
The next North Carolina legislative session doesn't begin until January, but discussions about how the state will deal with the coming fiscal crisis have been ongoing all year. Now, a new report from the Institute for Taxation and Economic Policy outlines how the state could raise additional revenue—without unfairly targeting low- and middle-income families—by reforming the itemized deductions on the state income tax.
Doing away with itemized deductions altogether would result in a tax cut for 50 percent of North Carolinians but would raise $404 million a year in revenue. Other options include capping the value of itemized deductions or converting the deductions to tax credits. All would increase revenue without increasing taxes on low- and middle-income families.
Considering the large budget shortfall North Carolina faces next year and the importance of preserving funds for vital programs and services, state lawmakers need to consider a variety of ways to raise revenues without asking sacrifices of families who have suffered the most during this economic downturn. The Justice Center's Budget & Tax Center has proposed numerous revenue reforms over the years, including closing loopholes in the corporate income tax and ending tax breaks that offer no benefit to the state. Reforming the state's itemized deductions is yet another option that should be on the table next year.
- Institute for Taxation and Economic Policy: "Writing Off" Tax Giveaways: How states can help balance their budgets by reforming or repealing itemized deductions
- NC Justice Center: Media Release - Report: Reforming "itemized deduction" tax break could save North Carolina millions, make state tax systems less unfair