Nov. 19, 2015
FOR IMMEDIATE RELEASE
CONTACT: Demi Dowdy (919) 834-2099 demi.dowdy@nccivitas.org
Results show that Obamacare’s Medicaid expansion would burden North Carolina
RALEIGH – Today, the Civitas Institute released a new study, authored by Dr. Eric Fruits of Economics International, which found that each additional dollar of federal grant money to North Carolina is associated with an increase of 81 cents in new state and local taxes.
In short, as North Carolina accepts more federal funds, state and local taxes rise.
A short summary along with access to the full study can be found here.
The study, “Impact of Federal Transfers on State and Local Own-Source Spending,” is the most comprehensive analysis of its kind to date, examining 40 years of data spanning 1972 to 2012. It serves as a reminder to voters and state lawmakers that federal grants are never “free.”
“Economists often say there’s no such thing as a ‘free’ lunch. Similarly, funds from the Federal government are not ‘free’ either. Strings attached – such as matching requirements and maintenance of effort mandates – impose steep additional costs on states accepting federal dollars,” said Civitas Policy Director Brian Balfour. “Moreover, accepting federal funds also means a state is ceding more of its sovereignty to Washington.”
The findings also refute liberal activists’ contention that Medicaid expansion amounts to “free money” from Washington. In fact, accepting an estimated $4.45 billion a year in “free” Medicaid expansion funds would cost North Carolina $280 million in additional annual costs, according to the Kaiser Family Foundation. As the new study shows, these state spending increases are almost always followed by tax hikes.
Among the study’s findings:
- Each additional dollar of federal grant money to the states resulted in an average increase of 82 cents in new state and local taxes. In North Carolina, the additional tax burden was an additional 81 cents per federal dollar spent in the state.
- Federal transfers to the states have soared in recent years, from $74 billion in 1980 to nearly $300 billion in 2012.
“You would think twice before accepting a new car if you knew maintenance would cost an arm and a leg,” added Balfour. “Similarly, as our study reveals, falling for federal grants can create a tremendous future burden for families and our state’s financial well-being.”
Author of the study, Dr. Eric Fruits, is available to answer media questions upon request. Contact Demi Dowdy at (919) 834-2099 or demi.dowdy@nccivitas.org for an interview with Dr. Fruits.
Founded in 2005, the Civitas Institute is a Raleigh, NC-based, 501(c)(3) nonprofit policy organization committed to creating a North Carolina whose citizens enjoy liberty and prosperity derived from limited government, personal responsibility and civic engagement. To that end, Civitas develops and advocates for conservative policy solutions to improve the lives of all North Carolinians.
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