Tax Cuts First, Well-Being Last: How reckless state tax cuts undermined affordability and quality of life in North Carolina
When the North Carolina General Assembly started cutting state taxes in 2013, supporters of the cuts made lofty promises:
- Tax cuts would lead to economic growth and jobs … but less was said about whether those jobs would be good ones or whether prosperity would be widely shared.
- The state would be on fiscally responsible footing … but the definition of responsibility — and whether it included, for instance, the fiscal capacity to restore average teacher pay to the upper half of state rankings — went unstated.
- The poorest North Carolinians would be better off … despite the fact that lawmakers eliminated a state tax credit for lower-income workers while also broadening the sales tax, which hits low-income people the hardest.
Nearly 15 years later, North Carolinians’ lived experience and available data tell us what actually happened:
- We’ve been ranked the worst state for workers for six years in a row, and have the 8th-highest share of workers making less than $18 per hour in the country.
- We face an annual projected budget gap that ranges from $2.5 billion to $4 billion, between Fiscal Year 2027-28 and Fiscal Year 2032-33.
- Because of state income tax cuts since 2013, we are losing almost $18 billion in revenue each year, and are on track to lose billions more if scheduled tax cuts go ahead as planned.
With NC House and Senate leadership at an impasse over whether to move ahead with additional tax cuts, North Carolinians should feel confident lifting up the truth of what has happened in our state: Taxes were slashed for the rich while starving our communities of public investments that support well-being for us all.
The chart below reflects what regular folks already know to be true: North Carolinians from all income levels pay taxes to create the well-being we want to see in our communities, including access to great public education, sound infrastructure, a safe and healthy environment, and so much more.
But by repeatedly cutting income taxes, the NCGA’s policies have redistributed our public dollars to the very richest, slashing their effective rates while leaving communities without the funding needed to support well-being for every North Carolinian. It’s no surprise, then, that polling shows 80 percent of North Carolinians report no personal benefit from the past decade of state tax cuts.
Less revenue has meant less investment in affordability priorities
It’s clear that while tax cuts for the rich continue to be the top priority of NC Senate leadership, the affordability crisis is the top priority for working families in North Carolina:
- Folks of all political stripes say that reducing the cost of living should be the first priority of state government, ranked far higher than reducing taxes.
- 70 percent want a state budget that invests more in education, infrastructure, and health care, even if that means the wealthy and profitable corporations have to pay more in taxes.
- 40 percent say they are worse off financially than one year ago.
The NC Budget & Tax Center looked at six areas of our state budget that have a direct connection to cost-of-living concerns. Inadequate state spending in some of these areas has allowed broken markets — like those for housing, health care, and child care — to go unrepaired, with costs spiraling out of control for families.
In other areas — like K-12 education and workforce development — prioritizing tax cuts for the rich has meant many North Carolinians’ incomes are languishing, and connections to good-paying jobs are weaker than they should be. Crucially, North Carolinians say that progress in these areas, among others, is central to their well-being and ability to thrive in their communities.
These budget areas are:
Below, you’ll find a chartbook that you can click through for each budget area that includes:
- Recent polling on North Carolinians’ budget preferences in this area
- Well-being indicators to understand recent trends and unmet needs
- Data on the state’s spending on affordability priorities over time
We end our look at each budget area with a specific example of a “missed opportunity:” a time when legislative leaders had the chance to make an investment in greater affordability, but chose additional tax cuts for corporations and the rich instead.
Note: Several programs below — especially those for child care and basic needs — are funded with both state and federal funds, with a state match required to draw down federal funding. We note cases where changes in federal funding clearly impact state spending trends, but we focus on state spending to highlight the choices state lawmakers make when tax cuts are prioritized above ensuring these federal-state programs deliver for NC families.
Housing
Missed opportunity: The Workforce Housing Loan Program (WHLP) is administered by the NCHFA and provides gap funding to make affordable housing development financially feasible in difficult-to-serve markets. The WHLP received $35 million in non-recurring funds in 2025, but the Senate’s proposed budget provided zero funding going forward for the program, while the House’s proposal provided only $5 million. The cost of supporting WHLP pales in comparison to the $1 billion in public dollars lost to another round of tax cuts in 2026.
Health Care
Missed opportunity: In the 2025 session, lawmakers underfunded the state’s Medicaid program by $319 million, and funding for the program is expected to run out in spring of 2026 without further action. The state also needs an additional $50 million this year to fund new Medicaid administration costs created by the so-called “One Big Beautiful Bill.” Instead of providing the funding needed to secure near-term Medicaid needs for North Carolinians, lawmakers prioritized the next round of automatic tax cuts at a cost of $1 billion in 2026.
Early Childhood Education
Missed opportunity: North Carolina has experienced a net loss of 367 licensed child-care programs since the start of the COVID-19 pandemic. Advocates asked for $280 million during the 2025 session to stabilize the industry and secure child care for child-care workers themselves. Rather than provide the funding needed to stabilize an industry in crisis, lawmakers allowed automatic tax cuts to proceed at a cost of $1 billion in 2026.
K-12 Education
Missed opportunity: In the 2025 session, lawmakers had the opportunity to raise educator pay (including classroom teachers, principals, and instructional support staff and others) by 10 percent, at a cost of $900 million in 2026. Instead, lawmakers allowed the next round of automatic tax cuts to go into effect, at a cost of $1 billion in 2026.
Workforce Development
Missed opportunity: In the 2025 session, lawmakers had the opportunity to provide $100 million in funding to the NC Community College System to implement Propel NC, which would connect students to high-wage jobs. Neither the House nor Senate budget proposal fully funded Propel NC, whose cost is a small fraction of the cost of corporate and personal income tax cuts in 2026. In the absence of a comprehensive budget, the NCGA passed small spending bills that provided $75 million in each of the next two fiscal years for increased enrollment at community colleges, but did not allocate funding specifically to Propel NC.
Basic Needs
Missed opportunity: In the 2025 session, lawmakers had the opportunity to preserve scarce revenue in anticipation of a new requirement that states share the cost of SNAP benefits with the federal government, which could cost NC upwards of $400 million per year.
A broken budget process is blocking voices of regular North Carolinians
The fact that our state budget and tax policies have failed to fund North Carolinians’ priorities in recent years is not an accident. It’s a direct consequence of a budget process that:
- Concentrates decision-making in the hands of a few powerful legislators,
- Provides no opportunity for public comment or public hearings to gather constituent input, and
- Releases key documents and holds crucial votes before lawmakers and the public have had time to read them.
The timeline below documents just how frequently the NC General Assembly has failed to pass a comprehensive budget or budget revision in recent years, leaving local communities scrambling. Failing to pass a comprehensive budget — all while putting tax cuts on autopilot — means that state services don’t keep up with population growth, costs, or North Carolina’s well-being priorities.
Conclusion: North Carolina needs a Well-Being Budget
This analysis has shown that nearly 15 years of state income tax cuts has delivered a very low effective tax rate for the wealthy few, while putting pressure on more regressive forms of raising revenue, like sales and property taxes, that hit lower-income North Carolinians harder.
This analysis also shows that a tax-cuts-first agenda has failed to deliver well-being and has undermined critical investments in the priorities that keep basic needs affordable that arise in poll after poll of the state’s residents. The consequences of this failure are seen in key indicators that tell us, in concrete terms rather than trickle-down promises, how North Carolinians are doing today: They are burdened by housing costs, unable to find affordable child-care, and losing access to health care. In the 2025 session, lawmakers passed over numerous opportunities to address constituent priorities and instead allowed another round of tax cuts for corporations and the rich to move ahead.
As the state looks ahead to the 2026 session, North Carolinians are looking for action on affordability and quality of life. Together with partners and communities across the state, the NC Budget & Tax Center will be looking this year for a Well-Being Budget with three features:
- New spending that goes toward regular people’s well-being priorities, like the high cost of living, public education, housing, child care, and more, and not to wealthy people’s private school tuition costs
- Tax policy changes that make our tax code more capable of sustaining investments over time and asks everyone to pay their share, rather than continued tax cuts for corporations and the rich that create scarcity in our communities and reduce quality of life
- A state budget process that includes working families’ voices, by holding public hearings and allowing public comment, rather than passing budgets in the dead of night that most lawmakers and the public haven’t had time to read or debate
A Well-Being Budget is not too much to ask — it is a responsible and necessary course correction. North Carolina has the resources to ensure that everyone can afford the basics and build a good life. What we need now is the political will to prioritize people over profits and long-term prosperity over tax cuts for the wealthy few.
Appendix: Methods and Data Sources
Spending
Data comes from current and historical Certified Budgets. In our analysis “state spending” refers to net General Fund appropriations, which are appropriations of the General Fund’s general purpose revenue. Several programs we analyze — especially those for child-care and basic needs — are funded with both state and federal funds. This analysis focuses on General Fund spending to isolate the budget choices of state lawmakers in appropriating state tax dollars for public services.
Inflation
BTC's preferred measure of inflation for budget analysis is the State and Local Implicit Price Deflator because this index more accurately reflects price changes for the goods and services that state governments buy, which are different than those purchased by household consumers.
The State and Local Implicit Price Deflator is also the preferred inflation measure of, for example, analysts who conduct national analyses comparing K-12 public education funding across states and over time.
