Commentary, NC Budget and Tax Center

$124 million of Extra Credit Grant Program would go to the top 20%

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Senate leader Phil Berger admitted yesterday that $335 isn’t enough to pay off a mortgage but could pay for a babysitter and a dinner out for parents.

His statement failed to recognize the reality of most parents in this state. When parents don’t have enough money to pay for rent, utilities or child care, they definitely don’t have enough money for a babysitter or a dinner out – even with an extra $335.

The proposed Extra Credit Grant Program within House Bill 1105 would use over $440 million of the state’s remaining coronavirus relief funds – most of the $552 million that remains in reserves.

Although direct cash payments are needed to help families make ends meet, this poorly designed program fails to target these grants to people who need them most. The primary mechanism for sending payments will be tax filings and, as North Carolinians learned after the Spring Economic Impact Payment rollout, more than 460,000 North Carolinians do not earn enough to file income taxes, even though they pay taxes in other ways. This means that this grant program would exclude many families who are most in need of cash support.

According to analysis by the Institute on Taxation and Economic Policy, about $124 million of these grants will go to households in the top 20% of income earners. Sending $335 to household that make an average of $240,000 a year is a missed opportunity to invest this money elsewhere. Especially when many students still lack broadband access and parents are struggling to pay for the basics.

As the House convenes this morning, there is an opportunity to recognize that $124 million, or 26%, of the Extra Credit Grant Program would go to wealthy households and would be better invested elsewhere.

During debate on the House floor, legislative sponsors of the bill suggested that Extra Credit payments would phase out for high-income taxpayers, in accordance with the federal child tax credit design. However, the bill language does not reference federal or state statute language on income eligibility to ensure that payments will be phased out for high-income households.

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