NC Budget and Tax Center, Uncategorized

NC EITC needed now more than ever

Today is EITC Awareness Day. It’s a timely occasion for North Carolina, as the debate over tax reform launched with a proposal to eliminate the personal income tax and, in turn, this important tax credit for working families.  Of course, the elimination of the state’s EITC, which has been widely recognized to be an important tool in addressing upside down tax systems, would also come when it is most needed.

The Budget & Tax Center released analysis this week that shows the replacement of lost revenue through the sales tax would shift the tax load even further onto middle- and low-income taxpayers in North Carolina.

The state EITC has provided a modest support to working families and improved the state’s upside down tax system.  Most recent data shows that more than 880,000 taxpayers claimed the credit.  Moreover, before the state’s enactment of the EITC in 2007, the lowest quintile of taxpayers paid 10.5% of their income in total state and local taxes in 2002.  Most recent data shows that percent has dropped to 9.5% in part due to the enactment of the state EITC.

Now is not the time to eliminate this tax policy and anti-poverty tool.  Instead, we actually need to scale it up, far more than reported in this study, if the proposal to raise the majority of our revenue from the sales tax goes forward. Of course, that would be hard to do without the personal income tax. We need the personal income tax and the EITC in place to address the already very real problem of a tax system that is upside down.  More than that, the EITC is a small investment that can make a huge difference in the lives of working families.

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