Finance Committee Increases Tax Load for Working Families, Cuts EITC
This morning, the House Finance Committee voted to reduce the state Earned Income Tax Credit (EITC) provided to low-income working families across the state. More than 883,000 North Carolinians claimed the credit in 2010, which provides working families with dollars to spend in their local communities. Each year the state updates its tax code to address changes made to the federal tax code during the previous year, as North Carolina’s tax code is linked to the federal tax code.
Improvements to the federal EITC were extended as part of the fiscal cliff deal, including eliminating the marriage penalty and extending the credit to larger family sizes. In decoupling the state credit from the federal credit, the Finance Committee voted to reduce the state EITC from 5% to 4.5% of the federal credit for tax year 2013. The result is a cut of $11 million to the state credit.
The EITC helps boost the wages of low-income families and helps them pay for basic necessities. Cutting the tax credit will further challenge the ability of these families to make ends meet and minimize its ability to address the upside down nature of our state and local tax system. The House finance committee also voted to cut the Work Opportunity tax credit. However, the committee did vote to increase the amount of itemized deductions that individuals can claim, which would largely benefit high-income individuals.