The North Carolina General Assembly has passed their $23 billion dollar budget. The bill was sent to Governor Cooper on June 22nd.
The new budget includes a 3.1% spending increase over the last budget. It also includes another round of tax cuts, being hailed as the most cuts since 2014.
The education portion of the budget increases spending by $700 million. Of that $700 million, more than $100 Million will be put towards teacher pay increase in the first year.
— Chad Barefoot (@ChadBarefoot) June 20, 2017
Most teachers will see an increase of 9.6% in pay over the two-year budget. The biannual breakdown is an estimated average increase of 3.3% in FY 2017-18 and 9.6% in FY 2018-19.
Veteran Teacher, those with 25 or more years of experience, will receive bonuses of $385 in both 2017-18 and 2018-19.
These raises will be the fourth and fifth round of raises for educators. Teachers have received pay raises from the legislature in 2014, 2015, and 2016.
The Department of Public Instruction has been allotted $9,046,403,622 and $9,425,109,426 for FY 2017”‘2018 and FY 2018-2019 respectively.
The budget comes in at $ 22,975,769,893 for FY 2017”‘2018 and $ 23,650,253,958 for FY 2018-2019.
Cooper Attacked Budget Before It Passed
Before the budget bill even passed, Governor Cooper attacked it, returning to the Occupy Wall Street themed rhetoric he used on the campaign trail.
“It does pick winners and losers,” said Governor Cooper. “The wealthy win but the average middle-class family loses.”
“A person earning $1 million or more a year will get a tax break that is 85 times larger than what a working family gets. Think about that for a minute: 85 times larger,” Cooper said in a press conference on June 20th.
Cooper Decides to Veto
Last week, the Governor stopped short of stating whether he would veto it or not. That changed on Monday when he released a statement saying he would use his veto.
Governor Cooper is currently 0-4 when it comes to his vetoes standing.
Senator Berger took to Twitter to blasted Cooper and accused him of breaking his promise to the voters.
In Monday’s statement, Cooper repeated his claim that people earning over a million dollars would get an 85 times larger tax break than the average working family.
The math is not on the side of the Governor and his statement feels like another stunt.
This is not the first time Roy Cooper has stumbled when it comes to taxation.
During a debate with former Governor McCrory, Cooper stated that, “Everyday working people got tax increases. Statistics show you are leaving out the middle class.”
That statement was demonstrably false.
Previous budgets reduced personal income taxes from 7.75% to 5.499%. With this latest round of cuts in the current budget, they drop to 5.25%.
The previous budget passed by the General Assembly aided middle and lower class families by making the first $17,500 a family earns exempt from income tax for the next two years.
The previous budget boosted standards deductions. The current budget will boost standard deductions again, relieving the taxpayers of even more tax burden.
Standard deductions will see a boost in the current proposed budget.
- Married, filing jointly will increased from $17,500 to $20,000.
- Head of Household jumps from $14,000 to $15,000.
- Single filers see a bump up from $8,750 to $10,000.
- Married, filing separately will go up from $8,750 to $10,000.
Beginning in 2011, the approximate tax relief averaged around $3 billion per year.
The corporate tax rates will also drop between 2.5% to 3%. In Monday’s statement, Cooper said that the legislature’s budget should, “they should eliminate the corporate tax cut.”
Cuts to the corporate rate have made the state extremely attractive to big business and have drawn over 300,000 jobs over the last three years to North Carolina.
Cooper’s press release said that for him to consider not vetoing the budget, the legislature needed to, “cap the income tax cut to those making less than $150,000.”
The Governor’s statement seems to indicate that no longer is a family making $200,000 or more considered ‘rich’. Now it’s $150,000 and up.
Checking Cooper’s “85 Times” Budget Math
As for Cooper’s math, it’s not even close to accurate according to Carolina Journal.
Carolina Journal notes that the math just doesn’t add up and that Cooper’s statements, “could not apply solely to the personal income tax changes scheduled to take effect in 2019.”
Excerpt from Carolina Journal:
“To be 85 times larger ”” or 85 times as great ”” as the savings for “working families,” the working family’s tax savings would have to amount to roughly $30.
Here’s the problem. Working families see substantially larger savings under the new plan.
Remember that the increased standard deduction removes from the tax rolls any married couple earning up to $20,000. If the tax change saves them $30 or less, that’s only because the state cannot save them any more money. They are paying no income tax.
For the couple earning $20,000, the change drops their income tax bill from $137 to $0. That’s substantially more than $30. Yes, the $1 million couple’s tax break is nearly 19 times as large, but the change has wiped out the lower-income family’s income tax liability completely, by 100 percent, while the higher-income family sees a 5 percent cut from what it paid under the outgoing rates.
The dollar savings grow larger as income climbs. At $25,000, the bill drops from $412 to $262. That’s a $150 difference. The $1 million couple’s tax break is 17 times as large, but the lower-income couple has seen 36 percent of its income tax burden erased.”
The article continues, giving more examples in incremental income levels, but the results are always the same. Higher income earners will see bigger savings, but their bill is bigger to begin with.
As demonstrated above, the maximum a million dollar earner will have in tax breaks is 19 times larger than that of a family earning $20,000 — however, that family’s tax burden is now $0.
The projected tax liability numbers are not in the Governor’s favor either.
— Brent Woodcox (@BrentWoodcox) June 26, 2017
Million dollar earners, no matter which way you slice the liability pie, are not getting an 85 times larger break than the average middle class family.
Governor Cooper has yet to show the public his math on where the “85 times larger” statement comes from.
Rainy Day Fund Attacks Are Hollow
Governor Cooper’s budget included only $300 million for the state’s rainy day fund. Cooper said that the budget to put $363 million into reserves was fiscally irresponsible.
While campaigning for Governor, Cooper attacked the rainy day fund.
In November of 2016, Cooper said that, “building up the rainy day fund in excess of what’s necessary for the state. Instead of doing that we could invest in our people.”
— Senator Phil Berger (@SenatorBerger) June 20, 2017
Cooper’s comments come at a time when his administration is facing significant issues in lack of aid for Hurricane Matthew victims. The legislature released around $200 million to help those victims in 2016.
The Governor’s criticism are also at odds with his own actions. In April, Governor Cooper signed House Bill 7, which strengthens the Rainy Day fund.