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North Carolina Policymakers Could Use Tax Code to Fight Rising Poverty

A new report by the good folks at the Institute on Taxation and Economic Policy provides a clear roadmap for how state policymakers can use smart tax policy to fight poverty.

The recent news of the US poverty rate reaching its second-highest level since 1965 – with the share of Americans living in deep poverty the highest on record – underscores the dire need for tax policies at all levels that work to combat poverty.  Yet state and local tax policy in most states actually contributes to increasing poverty rather than lifting families out of poverty.  That’s because low-income families in most states pay a larger share of their income in state and local taxes than middle- or high-income households.

Although North Carolina taxes low-income households slightly less heavily than average (due primarily to the state’s relatively progressive income tax and the Earned Income Tax Credit [EITC]),  low- and moderate-income North Carolinians still pay significantly more of their income in state and local taxes than high-income North Carolinians.

To rectify the problem of North Carolina’s upside-down tax system, the new report suggests the following strategies to state policymakers:

  • Increase the state Earned Income Tax Credit
  • Increase the state Child and Dependent Care Credit and make it refundable
  • Make the state Child Tax Credit refundable
  • Create a Low-Income Property Tax Circuit Breaker
  • Create a state refundable low-income credit to complement the EITC

As the report makes clear, fighting poverty with refundable tax credits is a proven, cost-effective strategy with a long history of support from both Republicans and Democrats.  Particularly at a time when poverty is increasing at an alarming rate, state policymakers could use refundable tax credits to provide a much-needed boost to families struggling to make ends meet in an unforgiving economy.

3 Comments

  1. david esmay

    September 23, 2011 at 8:44 am

    Sites are you Amish? Did you just say, throw the horse over the fence some hay?

  2. [...] A new report by the Institute on Taxation and Economic Policy provides a roadmap for state policymakers to fight poverty with refundable tax credits for working families, a proven, cost-effective solution with a history of support from both Republicans and Democrats.  (Progressive Pulse) [...]

  3. Jeff S

    September 25, 2011 at 8:17 pm

    I can’t say I’m a fan of procreation-based tax credits, much less refundable ones.