GOP Should Preserve Tax Credits for Working Families In Tax Plan
The study highlights the importance of three tax credits – the Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Tax Credit – that effectively support and encourage work and promote healthy childhood development, both of which expand opportunity for working families in North Carolina.
Administration and application for these tax credits is simplified by leveraging similar credits at the federal level, thus introducing little complexity to tax forms. As a result, these public investments not only build and strengthen North Carolina’s middle class but also are cost-effective and avoid confusion on income tax forms.
These credits put money into the pockets of more than a million families, helping them make ends meet and provide for their children. They also spur economic activity, as all of the money from the EITC and some of the money from the other two credits go to low- and moderate income families, who are more likely than wealthy families to spend the money in their local economies.
And given that the high cost of employment-related expenses and quality child care are major obstacles to participation in the workforce for many North Carolina families, the Child and Dependent Care Tax Credit, the Earned Income Tax Credit and the Child Tax Credit can make work pay for parents in low-wage jobs without forcing them to sacrifice the well-being of their children in potentially unsafe, lower-quality care environments.
At the same time, these tax credits, especially the Earned Income Tax Credit, go some way toward minimizing the existing upside-down nature of the tax system, which requires lower-income households to pay more in total state and local taxes as a share of their income than higher-income households do. Evidence has found that such supports for families with children reap benefits for decades through improved school achievement and earning potential.
North Carolina’s policymakers should continue to support these investments. The benefits will be shared broadly through a stronger middle class now and in the future.
To see how much these tax credits benefit working families in your county, click here.