NC Budget and Tax Center

The long-term benefits of the Earned Income Tax Credit

Research has long shown that the Earned Income Tax Credit (EITC) for working families significantly encourages work—especially among single mothers—and reduces child poverty more than any other existing policy tool. Although the EITC is largely a temporary support, new research by the Center on Budget and Policy Priorities indicates that this tax credit generates broader benefits that extend well into adulthood for the recipients’ young children. These children perform better in school, are more likely to go to college, and earn more when they reach adulthood.

For instance, a $3,000 boost in income from the EITC during a child’s early years is associated with a boost in educational achievement that is equivalent to an extra two months of schooling. And as illustrated in the infographic below, a boost in income from the EITC during a child’s early years can contribute to a significant increase in earnings in adulthood as well as increased work activity for individuals between the ages of 25 and 37.

CBPP_EITC

The maximum North Carolina EITC available to working families was below $300 in 2012, building on the successes of the federal credit. Despite the volumes of research, state lawmakers recently signed off on a bill to cut the state EITC to 4.5 percent of the federal credit in tax year 2013 and to get rid of the credit thereafter. The result is a $105.2 million tax hike on nearly 907,000 working families beginning in tax year 2014.

As lawmakers pursue tax reform, North Carolina will be better served if we maintain this proven policy tool for working families doing their best to work, support their children, and move up the economic ladder.

 

Check Also

Redesigning TANF to lift more families out of poverty

The 1996 welfare law that created Temporary Assistance ...

Top Stories from NCPW

  • News
  • Commentary

When Gov. Roy Cooper visits Wilmington on Monday, it's unlikely that he will be greeted by the [...]

When Gov. Roy Cooper signed the Strengthen Opioid Misuse Prevention or STOP Act into law last month, [...]

Support for needy districts and key positions within North Carolina’s top public school agency may b [...]

Wilmington is bustling this summer. Downtown, horse-drawn carriages take tourists along the riverfro [...]

The post GenX & ’emerging contaminants’ appeared first on NC Policy Watch. [...]

73---number of days since the Senate passed its version of the state budget that spent $22.9 billion [...]

When you lower the bar enough for what’s possible, you create a new normal in which an inch forward [...]

It’s not an original thought to point out that the Trump Administration is a larger version of what [...]

Featured | Special Projects

NC Budget 2017
The maze of the NC Budget is complex. Follow the stories to follow the money.
Read more


NC Redistricting 2017
New map, new districts, new lawmakers. Here’s what you need to know about gerrymandering in NC.
Read more