NC Budget and Tax Center

Decisions, decisions: Senate leadership’s tax priorities are off balance

There are reports that the state Senate and House leadership is working on a compromise tax plan—with the catch, of course, being that many North Carolinians will likely not view the final tax plan as much of compromise, especially in light of how it will probably treat low- and moderate-income taxpayers.

In order to truly be fair to low- and moderate-income taxpayers, the upside-down nature of the state’s tax code must be addressed. But, as our analysis shows, leadership is pursuing tax plans that ignore this principle of equity. They’re also ignoring the important role that the Earned Income Tax Credit (EITC) plays and confusing how the EITC matches up against the standard deduction and a zero tax bracket.

You may recall that at the beginning of session, legislators chose to reduce the state’s EITC—which is a modest but vital support for nearly 907,000 workers earning low wages—and to axe the credit at the end of the 2013 tax year. This credit helps ensure some measure of financial stability for struggling families at a time when good-paying jobs are still hard to come by.

At the time, legislative leadership asserted the state could not afford the EITC’s $105.2 million price tag. Meanwhile, they are pushing for the repeal of the estate tax and huge tax cuts for the wealthy and profitable corporations that, when combined, cost significantly more than the EITC but offer fewer benefits to North Carolinians and the state’s economy.

The chart below contrasts the price tag of the EITC and other prudent choices that available to the Senate leadership against the flawed change leadership is pursuing.

Decisions, Decisions- Senate Leadership's Tax Priorities are off balance

There may be problems with North Carolina’s tax code, but this tax credit for low-wage workers is not one of them. We should stop giving tax breaks to the wealthy and profitable corporations, especially when they come at the expense of working families.

One Comment

  1. Doug

    June 19, 2013 at 8:25 pm

    I guess if you live in socialism world where the government owns all the wealth and lets the people keep some of it…then it is out of balance. For everyone else in the real world what is going on to reform the tax code is just what we sent them there to do…..by a fairly overwhelming majority I might add.