End of the Sales Tax Holiday highlights need for strong EITC
This upcoming weekend will mark the final sales tax holiday in North Carolina, one of the only good things to come out of the final tax plan recently signed into law by Governor McCrory.
Although policymakers have in the past said this policy is a way to address the fact that low- and middle-income families pay a higher percent of their income in taxes relative to higher-income families, it is inefficient and untargeted because everyone receives the tax break, not just those who deserve this tax relief.
There are other policies that would more effectively achieve this goal. The state Earned Income Tax Credit (EITC) is certainly a more efficient and effective way to reduce state and local sales taxes paid by middle- and low-income families. But the final tax plan eliminates the state EITC, which will hurt hard-working families across the state. Last year, nearly 907,000 low-wage North Carolina taxpayers in all 100 counties benefited from the tax credit. The EITC is widely recognized as one of the most effective ways to fight poverty, especially among children. This credit helps working families afford basic necessities and puts consumer dollars into local economies.
At the same time, the final tax plan gives huge tax cuts to the wealthy and profitable corporations. As a result, middle- and low-income families will, on average, see their tax load increase in the years ahead. So, instead of mourning the end of the sales tax holiday in North Carolina, we should urge policymakers to bring back the EITC to really address the fact that sales taxes hit low- and middle-income taxpayers hardest.