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Rich get richer, poor get poorer in N.C.

By Fannie Flono
Associate Editor

Before you throw away those leftovers, a new report from the Center on Budget and Policy Priorities and the Economy Policy Institute might give you pause. A lot of your fellow North Carolinians really struggled to get a Thanksgiving meal on the table Thursday, let alone had enough left uneaten to consider discarding.

The poorest in this state have seen their household income drop 3.7 percent, or about $735, over the past decade or so while the richest saw theirs rise by 5.5 percent ($8,054), according to the institute’s recently released study, “Pulling Apart: A state by state analysis of income trends.” Middle-income North Carolinians did just a little better than the poor, seeing their income drop by 3.4 percent or $1,978.

The changes boosted the income gap between the rich and the poor. In fact, North Carolina is among states in the United States with the highest income inequality between the poorest and the richest. It is 17th on the list, just above Alabama, and just below Oklahoma. New Mexico leads the list. Arizona, California, Georgia and New York round out the top five.

But it gets worse for the Tar Heel state. North Carolina ranked as the 12th worst among states for the greatest increase in income inequality between the top fifth and middle fifth of households. The state drops to 6th worst for the greatest increase in income inequality between the richest 5 percent and the middle fifth over the same period.

Notes Alexandra Sirota, director of the Budget and Tax Center, a project of the North Carolina Justice Center: “As state policymakers prepare for the coming legislative session and tax reform, they should propose policies that narrow – rather than widen – the income gaps between the richest and lowest- to middle-income residents. Tax policies have an important role to play in fighting growing income inequality. Proposals to fix the problems with our revenue system should not benefit higher-income taxpayers at the expense of middle-income taxpayers.”

Sirota is right, and I hope lawmakers listen. Unfortunately, legislators have already shown a propensity not to do so.

Last year, the Republican-dominated General Assembly gave one of the state’s largest tax breaks in a decade to businesses. That break meant a loss of $336 million a year in state revenue – an estimated $132 million this year – and was generally recognized as a misguided boon for well-off doctors, lawyers and business owners. Even many of the doctors, lawyers and businesspeople cried foul about the largesse coming their way.

The state can’t afford such policies that give more to the rich and leave the poor and middle-class struggling. They help create income schisms that will eventually cost all N.C. taxpayers as we foot the bill for more crime, more drug dependency and more welfare.

North Carolina fares better than some states but residents should have great concern about what’s happening to the poor here. UNC law professor Gene Nichol, also director of the UNC Center on Poverty, Work & Opportunity, noted recently in the Raleigh News & Observer, just 11 years ago the state had the 26th-highest poverty rate in the country. But last year, North Carolina’s rate became the 13th-highest.

Worse, a large percent of the poor are children: Data from the U.S. Census shows that one in four N.C. children live in poverty. That’s reportedly a five percentage point increase since the start of the Great Recession five years ago. About 40 percent of those poor children are African-American, Latino or Native American, Nichol said.

And contrary to the fairy tale some N.C. lawmakers believed and tried to foist off on the public last year while proposing cuts in the state’s prekindergarten program, a lot of N.C. children live in extreme poverty. In fact, the number living in extreme poverty (roughly $11,000 for a family of four per year) increased by 25 percent from 2007-2009.

The impact on North Carolina’s children makes the drop in incomes in the “poorest households particularly troubling,” said Tazra Mitchell of the Budget and Tax Center. “Growing up in poverty is harmful to our state’s children and affects everything from their performance in school to their earnings as adults. Addressing the overall regressivity of the state’s tax system by extending the state’s Earned Income Tax Credit is an important way to help struggling families move up the income ladder.”

To effectively tackle the state’s growing income inequality, the tax center also recommends improving the unemployment insurance system, strengthening supports for low-income workers, and raising the minimum wage and/or index it to keep pace with rising costs.

I’ve long advocated for restructuring the state tax code, and with Republican Gov.-elect Pat McCrory having talked about it during his campaign, that might finally become a priority – might. If it does, modernizing the code must include more revenue generators – such as an expanded sales tax on services. More people of means must pay into the tax system, not get breaks to skirt it.

The “Pulling Apart” report takes note of another problem in North Carolina: The growth in low-wage jobs. The report tags that and a jobs deficit as the primary causes of the widening income disparity. Policymakers at the state and national level must find strategies to deal with those twin scourges.

This is not the kind of information most of us want to contemplate today with our tummies full as we scour for Christmas bargains on the first big day of the holiday shopping season. But we should.

North Carolina has the 10th highest rate of children living in poverty in the nation. It has the 9th highest rate of food insecurity for families. And it has the 24th highest rate of homelessness.

For the North Carolinians lucky enough to have plenty, be thankful. But don’t forget about those struggling.

Today, think about what you can do to help them through their trying times and get them on their feet. Think about the policies and strategies needed for them to become productive members of their communities and our state.

The poor number more than 1.6 million in North Carolina. They reside in every one of the state’s 100 counties, including here in Mecklenburg County where 15.6 percent of residents live in poverty. We ignore them at our peril, and theirs.

Fannie Flono is an Observer associate editor. Email: fflono@charlotteobserver.com.
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