Legislators poised to reduce NC Earned Income Tax Credit despite its powerful anti-poverty impact

This afternoon, legislators serving in the NC House are scheduled to approve HB 82, a bill that would reduce the state Earned Income Tax Credit (EITC) from 5 percent to 4.5 percent of the federal credit for tax year 2013. Worse yet, legislators have already stated that they will not extend this important tax credit beyond its sunset date at the end of the year. Doing so would shift the tax load to the state’s lowest-earning families and could push more North Carolinians into poverty, according to a new report released today by the NC Budget and Tax Center.

North Carolina’s tax system does little to help low-earning workers and their children who are living on the margins; it actually makes it harder for them to meet basic needs. Even with the state EITC—which provides workers earning low wages with a credit to offset their total state and local tax contributions—moderate- and low-income working families still pay a greater share of their income in state and local taxes compared to the upper-middle class and wealthy. As policymakers consider changes to the state’s tax code this legislative session, it is critical to maintain this important tax-equity tool.

Beyond serving as an important tax-equity tool, the state EITC also delivers a powerful anti-poverty effect, especially for the state’s children. North Carolina already has the 13th highest poverty rate in the nation, with more than 1 in 4 of its children living below the federal poverty line. Child poverty rates for children of color hover well-above the state rate, approaching nearly 1 in 2 kids of color in some of the state’s counties. The federal EITC lifted approximately 293,400 North Carolinians—half of whom were children—above the federal poverty line during the 2009-2011 period.

Similar data is not available on the state EITC, but we know that children benefit when they live in families with adequate resources to meet their basic needs. Dollars from the state EITC are often spent on everyday purchases such as food, childcare, education expenses as well as rent, home repair, and debt—making it easier for North Carolinians to keep working while also taking care of their children.

For young children, moving out of poverty is particularly important because poverty impacts the architecture of their developing brains. Research has found that lifting income in early childhood not only tends to improve a child’s immediate educational outcomes, but is associated with more schooling, attachment to the labor force, and higher earnings in adulthood. Here are two ways the EITC impacts children:

  • Research shows a link between an increase in the EITC for families with more than two children and an increase in achievement in middle childhood for the children of these families, and
  • Results from one study suggest that the EITC may be responsible for significant reductions in the fraction of children who are overweight, but not obese, and in the fraction of children in poor health.

The EITC is making a positive difference in the lives of working families with children, especially during the weak economic recovery. Now is precisely the wrong time to take away this support for low-income workers.

4 Comments

  1. Carol Zylbert

    February 19, 2013 at 2:30 pm

    I recently helped someone making $12.00 per hour with his taxes. Believe it or not, he paid almost as much to NC as to the IRS! Just $100 less! NC taxes really soak the working poor.

  2. love my state

    February 19, 2013 at 2:38 pm

    there is just no end to the mean spirited, short-sighted legislative actions these right wing teapublicans are delighting in orchestrating. if they had any moral fiber or conscience, they’d be ashamed of themselves for what they are doing in record breaking speed. and if they don’t destroy everthing good about our beautiful state in the next two years, let’s hope they get shown the door in 2014.

  3. [...] Budget and Tax Center’s Tazra Mitchell noted on the Progressive Pulse earlier today that a cut in a state EITC or its outright elimination would [...]

  4. Mary

    February 26, 2013 at 9:54 pm

    I believe all these people have for got the hard working people that are just barely living. All I hear is we put thousands of dollars in this program and that program then they need to be over these people seeing where it is going. I hear all these great stories of how they are going put jobs out there, how they are going help people just barely getting by, and how they are going help the elderly. Well why are we always being faced with something like this. Like they are cutting on medicaid and medicare all the things they stand up there and say oh we are concerned about that, we are going do something about that ,this is just another one thing and then they are trying to do the total opposite. I know I have been through some terrible things and things I probably will never forget just because I had to get out of work again with spine problems many medical problems that all I hear is there is no cure it’s only going get worse yet I have been going through disability for the 3rd year now. The only main help I have received is medicaid after going to hearing for that. I’m on medication that I average taking about 21 pills a day and if we try to cut one out my blood pressure is 200/ over a hundred something. Yet I have not even had one dime to my name to pay for the copay on my medication which has moved up to about $56 a month it’s well find that on your own. I have reached out to Mr. Butterfield for help, Beth P., the government, Oprah I mean sending pages of medical everything I did receive one letter from the White House we are working on these issues. It’s funny I run across a lot of people alcoholics, Drug Addicts, every day people who talk about the things they do how crazy they act to get there check and fussing about raising it to the full benefit for there alcohol and drugs. I hear it all the time and most has been playing the systems for years and out bragging about it yet they have a check medical food stamps everything you can think of and most say they don’t even step into a hearing for it. Most has never work a day in their life. I’m thinking well I guess the way to get help here is to become a alcoholic or a dug Addict and walk the streets and brag how I screwed the system and how stupid they are. How I’m going in next and put on this great performance to get my check raised. It’s just amazing and people who hold the power to help you I really feel a lot acts as if it’s funny and they can care less about you. I know I have had to fight for every single thing I have received. This is the second time I’ve lost my home everything I have for the same medical problems just worse. Who has cared?