NC JUSTICE NEWS: Corporate Tax Dodging + Medicaid Cuts + Prosperity Watch

June 21, 2011

CORPORATE TAXES: Bill opens loopholes for multi-state companies

The House gave final approval last week to a bill that will likely open major loopholes for large multi-state corporations and leave North Carolina more vulnerable to tax shelter abuse.

The House voted on Friday to concur with complicated changes to House Bill 619 that were rushed through the Senate, representing a problematic “pass first, ask questions later” approach to major tax changes. The passage of the law could have devastating consequences for key public investments while also putting locally owned North Carolina businesses at a disadvantage compared to big, multi-state corporate competitors.

Under current laws, North Carolina’s Secretary of Revenue has the authority to require in-state and out-of-state subsidiaries to file a joint tax return if there is evidence of multi-state corporations shifting income to avoid paying state taxes. The new bill would only give the Secretary of Revenue the authority to require corporate subsidiaries to file a joint return if transactions between subsidiaries have no "reasonable business purposes" other than reducing the corporation’s tax liability. In turn, corporate accountants could restructure tax shelters and give them the appearance of "business purposes," even if the primary purpose was to, in fact, reduce corporate taxes. This provision also would likely cost the state $30 million a year.

Opening large tax loopholes for multi-state corporations is not an effective economic strategy for North Carolina, a state where business taxes are already the lowest in the nation. The bill would only stack the deck against local business and starve the critical public structures North Carolinians depend on. Instead of rushing to pass such a consequential piece of legislation at the end of the session, lawmakers should take adequate time to craft corporate tax rules that treat all businesses fairly while also ensuring that all pay their fair share to support the state's vital public investments.

MEDICAID CUTS: The fight goes national

In Washington, the current budget proposal by House Budget Committee Chairman Paul Ryan presents a dire future for Medicaid patients in North Carolina, half of whom would lose their coverage if the budget is approved. Ryan’s budget proposal includes more than $1 trillion in Medicaid cuts, a sure-fire way to erode the progress made by North Carolina to reduce the uninsured rate for its most vulnerable citizens, including children.

Other lawmakers have offered proposals that would cut the Medicaid program or fundamentally alter its structure by converting the program into a block grant, setting a cap on federal spending, and rolling back protections that ensure vulnerable North Carolinians can continue their coverage. A Medicaid block grant would not only prevent the program from expanding its coverage, but would also shift costs to states, beneficiaries and health care providers, meaning North Carolina would have to contribute more of its own funds. The state would be left with the choice of raising taxes, cutting spending or slashing eligibility, benefits and provider reimbursement – all amounting to a larger number of uninsured citizens and reduced access to health care.

If the U.S. House-passed plan goes into effect, North Carolina will lose nearly 40 percent of its federal Medicaid funding over the next decade. Children, people with disabilities, and senior citizens account for nearly 90 percent of the North Carolina’s Medicaid spending, and the program provides critical health care and long-term services to more than a million individuals in our state. It’s time for North Carolina lawmakers to send a message in Washington: the state’s Medicaid program provides high-quality care for our state’s most vulnerable citizens. It's critical that lawmakers act to block grant proposals, spending caps, and legislation that would undermine Medicaid and hurt the individuals who most rely on its services.

PROSPERITY WATCH: The new pulse on the state of the economy

The Budget & Tax Center recently launched its Prosperity Watch feature, a new source for information on the state of the economy. This week, the BTC addresses the most recent job data, which shows that there are currently not enough to jobs to make up for the loss of work since the start of the Great Recession.

The current unemployment rate, 9.7 percent, remains unchanged since April, and has hovered around this level since November 2010. Job losses in the public sector over the past year have driven worse-than-expected labor market outcomes, with data showing that North Carolina has lost 32,500 jobs in the government sector since May 2010. Nearly 30,000 more jobs will be lost over the biennium due to state budget cuts, with half of those jobs in the private sector, suggesting even further challenges for the economic recovery in the future.

Click here for the complete breakdown and a graph showing where North Carolina’s job deficit currently stands. And check back every week in NC Justice News for the latest information on the state of the economy.

HEALTH CARE EVENT: Brunch for older adults and caregivers

Join the NC Justice Center and the AARP NC in Greenville on Thursday, June 23, for a free brunch for older adults and caregivers to address the state’s key health care issues.

The event is part of the Campaign for Better Care, which seeks to make improvements in the health care system for vulnerable, older adults, and build a strong and lasting consumer voice for better health care. Be sure your voice is heard. Come and share your experiences, tell us about what you think needs to be changed in North Carolina’s health system, and ask questions of representatives from AARP, the Seniors’ Health Insurance Information program (SHIIP), and other experts.

The lunch will be held on Thursday, June 23 from 10:00 a.m.-12:30 p.m. at the Pitt County Council on Aging/Senior Center at 4551 County Home Road in Greenville.

Registration closes today at 5:00 p.m. RSVP to Nicole Dozier to reserve your space now at or (919) 856-2146.


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