Hurricane Matthew has caused extensive damage to the very foundations of communities in eastern North Carolina. While not getting the attention that Floyd did in 1999, it is actually much larger in scope, with 20,000 more homes damaged or destroyed than in 1999. In the face of such devastation, there is opportunity to rebuild our communities stronger than before if North Carolina leaders plan for smart investments.
State leaders have already pursued the immediate federal assistance programs available to support small businesses and to help those who lost work and who are hungry and homeless because of Matthew. And today, state legislators convened a special session during which they will begin the work of planning and investing in the region’s recovery.
Such planning requires designing a state-level policy response that is accountable to communities, inclusive of everyone in the region—even the most marginalized.
Importantly, however, it also requires a state tax code that makes sure there is adequate recurring revenue available to complete the recovery process. And an important first step in this regard should include keeping the corporate income tax rate at its present four percent rate to ensure that the state can continue to meet needs and build a resilient region.
If state policymakers don’t take action during the special session, North Carolina will have $500 million less each fiscal year because the tax rate on profits earned by large corporations will drop to three percent on January 1. This tax rate, paid by the largest and most profitable businesses in the state, has already been slashed multiple times (it was 6.9 percent as recently as 2013) and is already one of the lowest in the South.
It is clear that the needs stemming from Matthew are likely to come close to $500 million when including the required match for critical federal dollars for infrastructure and direct household assistance. Given the additional challenge facing western North Carolina and the unanticipated costs of fighting wildfires across that region, it is only fiscally responsible to hold the tax rate at its current low level to ensure that these needs are met without reducing existing investments in communities across the state.
The experience of past disasters in North Carolina and the nation demonstrate the need for emergency response and rebuilding to be accountable to the communities impacted and focused on serving all those affected, even if they have been marginalized in the past. Doing so will put front and center the long-term challenges that have faced the region so that in rebuilding, residents and business in the eastern region can be better positioned to weather future economic and natural disasters.
Happily, there is a positive path forward on this front. It’s possible that the state’s commitment to building eastern North Carolina could be truly transformational. It’s possible to make sure every household affected finds safe and affordable housing in communities that are sustainable in the face of future environmental threats. It’s possible to protect farmers and businesses, particularly Historically Underutilized Businesses, from their immediate losses and also connect these leaders to capital, public contracts and new markets that can sustain their contributions to the economy. It’s possible to ensure that every child is fully supported in his or her education – both in and out of the classroom. It’s possible to protect the region’s environmental assets. It’s possible for state leaders to commit themselves to a vision of a thriving North Carolina.
Such a reality is within our reach. The obvious first step is to ensure that we have the resources to make the smart investments to get us there. And that requires immediate action to keep the corporate tax rate at the current rate before the New Year.
Alexandra Sirota is the Director of the N.C. Budget and Tax Center.