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North Carolina Policymakers Could Use Tax Code to Fight Rising Poverty

Posted By Ed McLenaghan On September 22, 2011 @ 4:20 pm In Uncategorized | Comments Disabled

A new report [1] by the good folks at the Institute on Taxation and Economic Policy [2] 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 [3] – 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 [4] 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 [5] 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.

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URL to article: http://pulse.ncpolicywatch.org/2011/09/22/north-carolina-policymakers-could-use-tax-code-to-fight-rising-poverty/

URLs in this post:

[1] new report: http://itepnet.org/poverty2011.php

[2] Institute on Taxation and Economic Policy: http://itepnet.org/

[3] share of Americans living in deep poverty the highest on record: http://www.cbpp.org/cms/index.cfm?fa=view&id=3580

[4] contributes to increasing poverty: http://www.itepnet.org/whopays.htm

[5] pay significantly more: http://www.itepnet.org/wp2009/nc_whopays_factsheet.pdf

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