Politics & Government

NC budget writers await April 15 returns

The next couple of months will give legislative budget writers a better idea of where the state stands financially, as analysts chart the effects of the legislature’s tax code changes since 2013.

Income tax rates are lower and sales taxation is more broad under the Republican-dominated General Assembly, but state revenues have arrived below target this fiscal year – off by $190 million as of the last monthly report.

And that’s filling budget leaders’ heads with questions:

Did the holiday spending season help as much as hoped? What will corporate and nonwithholding personal income taxation produce? How will changes in personal income tax law affect numbers at tax time in April?

January starts the second half of the fiscal year, where answers lie.

According to the legislature’s Fiscal Research Division, income tax tweaks such as limiting itemized deductions and eliminating the business income deduction should boost tax payments and trim refunds, for instance.

“All eyes will be on April 15,” the tax filing deadline, said Barry Boardman, chief economist with fiscal research, who will issue his next quarterly revenue outlook Jan. 15.

Senate leader Phil Berger, a Republican from Eden, said in December that the revenue lag was something to watch, but not agonize over. He called it small compared with the budget gap of more than $2 billion that lawmakers closed in the 2011-12 session.

But being $190 million below expected revenues demonstrates that the GOP’s tax-structure changes aren’t working as planned, critics say.

“We have to remember that the recent $190 million revision is on top of previous revisions showing that the tax system was already underperforming,” said Alexandra Sirota, director of the N.C. Budget and Tax Center, an advocacy group that has been critical of the tax cuts. The previous month’s revenue figure was $150 million below expectations. Before that, it was off $61 million.

In conversations about revenue lags, shortfalls or gaps, state budget director Lee Roberts often notes that the overall context is a $21 billion budget. The off-target revenue number is relatively small, though one to monitor, he says.

Staff writer Benjamin Brown