Earned Income Tax Credit, Child Tax Credit can help N.C. families during COVID-19

The COVID-19 pandemic has shed harsh light on the economic inequality, low wages and decades of inadequate investment in our safety net infrastructure, which are harming North Carolina families and challenging an equitable and speedy recovery from this health and economic crisis. 

Today, on EITC Awareness Day, we highlight the importance of the Earned Income Tax Credit (EITC) to addressing the immediate challenges and systemic issues facing workers who earn low wages. The evidence is clear that tax credits for working families can do more at the federal and state level to help with family economic stability, health and well-being. 

A new report from the Annie E. Casey Foundation recommends Congress expand the popular and effective federal Earned Income Tax and Child Tax Credits to provide increased financial stability to the many families struggling to afford the basics during the protracted recovery from this public health and economic crisis.  

About 1 in 7 North Carolinians entered the COVID-19 pandemic already experiencing poverty. In 2019, 13.6% of North Carolinians lived in poverty — an income of $25,750 or less for a family of four. This means the state entered the pandemic with more than 1.4 million residents already in poverty. The pandemic has only made it more difficult for North Carolina families to afford enough food, a safe and stable home, and health care when they need it. Some 19% of North Carolina adults with children in the household reported sometimes or often not having enough to eat during the pandemic, while 18% reported having slight or no confidence in paying their rent or mortgage on time.  

Poverty rates by age reveal persistently high levels of childhood poverty. In 2019,
1 in 5 North Carolinian
 children lived in poverty. The poverty rate for children under 5 years old was the highest for any age group — at 22%. After peaking at 26% in 2012, child poverty has remained elevated in comparison to the total poverty rate, as both declined slowly.  

Combined, the EITC and CTC help lift more than 5 million children out of poverty annually in the U.S. and provide more than 6 million with additional crucial resources that make it easier for recipient families to afford necessities like housing, food, medical care, as well as safe, quality child care. However, the expansion of these programs is necessary because, due to the policies’ design,
27 million children live in families with incomes so low they do not receive the full benefit of the credit.
 

Kids whose families claim the EITC and CTC can expect to do better in school, have an increased chance of attending college, and earn more as adultsIn their report Kids, Families, and COVID-19,” the Annie E. Casey Foundation recognizes the EITC and CTC as existing tools whose expansion is a crucial element of an equitable policy response that prioritizes children and families and helps ensure children’s well-being during and after the pandemic recovery.   

Some 20% of eligible filers in North Carolina are missing out on the positive benefits of the EITC and the cash assistance the credit provides to help a family navigate the COVID-19 crisis. Unfortunately, 20% of eligible filers in North Carolina aren’t benefiting from the EITC credit because they do not claim it. In order to maximize the credit’s positive health, educatio, and economic impacts in our state, it is crucial to raise awareness among the more than 200,000 North Carolinians who are eligible but do not claim the credit, and connect them with quality, not-for-profit tax preparation like the IRS VITA program 

Heba Atwa is a Policy Advocate for the Budget & Tax Center, a project of the NC Justice Center.

Too little food, too few jobs: Survey shows pandemic-related challenges facing many North Carolinians

Graphic: SEAP, based on 317 anonymized surveys of North Carolinians who participate in food assistance programs

“Lost my place because I didn’t have any money coming in. Couldn’t work because the schools were closed and I didn’t have childcare.” — Ginni in Carteret County

This is just one response to a survey of North Carolinians who receive food assistance, conducted by the Southern Economic Advancement Project.

The COVID-19 crisis has left thousands of North Carolina families struggling to make ends meet. As part of an effort aimed at understanding the challenges facing people across the South, a SEAP uses 317 anonymized surveys of SNAP food assistance participants to document  COVID-related hardship in North Carolina. The results have been released in the group’s full report.

The North Carolinians surveyed from Aug. 28 to Sept. 7 reported food insecurity and job loss as the top challenges in the pandemic, and noted that help with food, housing and utilities are needed now.  

Fifty-six percent of those surveyed said they were having trouble affording enough food to feed their families, while 38% were struggling with job loss.  

Many of those surveyed noted the difficulty managing rising food, housing, and utility costs while facing job loss or reduced hours and wages.  Those surveyed also remarked that government support did help, although many of those supports have expired.  

Survey respondents shared their experiences in this public health and economic crisis: 

“No food on shelves. Had to go to other towns for food. All pricing went up. You get half of what you normally buy because of high prices … ” — Sara in Mooresboro

“I had savings. I’ve had a stable job. This pandemic hit us hard in areas we thought we were prepared for. Fishing for assistance has been challenging, and we shouldn’t have to in times like these.” — Valerie in Kenansville

As well as a call to action for elected officials: 

“It’s time to put your agendas to the side and help the people. Without the people you wouldn’t have your job.” 

The findings of this report are a reminder that it is time for Congress to put people before politics and prioritize a COVID relief package ahead of anything else, including wrangling over the US Supreme Court vacancy.  

Too many of our North Carolina children and families are suffering needlessly due to the inaction of our lawmakers.  With the House moving forward this week on a new package to respond to this public health and economic crisis, it is time for the Senate to prioritize action this week 

More than a million North Carolinians missing out on millions of dollars in stimulus payments

Tens of millions of Americans and more than a million North Carolinians risk losing out on the stimulus payments provided through the recent CARES Act. These payments of $1,200 to individuals and $2,400 to married couples are a crucial lifeline during the economic and health crisis of the COVID-19 pandemic.

Under the current structure of the CARES Act payments, about 370,000 North Carolinians miss out on these dollars because they are older than 17 and claimed as a dependent on their parents’ taxes. An additional 300,000 North Carolinians are ineligible because they, or someone in their household, files taxes using an ITIN (Individual Tax Identification Number).

About 12 million Americans — including 469,560 North Carolinians — risk missing out on the stimulus payments if they do not file a form to receive it, according to a new report from the Center on Budget and Policy Priorities (CBPP).

The CARES Act payments are a key tool to help families cope with the loss of jobs and income in the pandemic and stimulate the economy. Aggressive outreach can help reach the 469,560 North Carolinians who risk missing out on the CARES Act stimulus payments because they did not file a tax return, many of whom are very low-income families with children, people who have been disconnected from work opportunities for a long period, and low-income adults not raising children in their home.

The payments are important for providing stabilizing cash income to households. Cash income has been found to provide near-term benefits in balancing the costs of basic or emergency needs, as well as long-term benefits to educational attainment, economic mobility, and better health outcomes. The IRS, working with the Social Security Administration and the Department of Veterans Affairs, has been automatically delivering these payments to tens of millions of people who regularly file federal income taxes or receive certain federally administered benefits. But the automatic payment method misses about 12 million people nationally — including people of color, children whose parents are paid low wages, people without secure housing, and others — because they aren’t required to file federal income tax returns due to their low incomes and do not participate in one of those specified, federally administered programs.

According to the report:

“This group of non-filers eligible for payments are disproportionately people of color because they are likelier to have lower incomes due to historical racism and ongoing bias and discrimination. Ensuring that low-income people of color receive the payments for which they qualify is especially important given emerging evidence that they are being hit hardest by both the economic and health effects of the pandemic.”

Read more

State and federal policy responses to the COVID-19 virus

This blog post will be regularly updated to capture key policy responses to the COVID-19 virus. (Last updated 1:45 p.m. Tuesday, March 24)

Reports from Budget & Tax Center Staff

This post summarizes steps taken thus far at both the federal and state levels. Scroll down to see a list of steps taken so far, or click on the following links to bring you directly to a specific section:

COVID-19 provides a sobering reminder of how much we need effective and well-resourced governance at the state and federal levels. Particularly in times of crisis, we need an infrastructure that delivers a coordinated, seamless response and reaches each and every person in the community.

The coming months will test federal and state leaders’ ability to blunt the impacts of this global pandemic and contain the harm to the health, well-being, and economic security of people.

Decades of tax cuts have left us vulnerable to a moment like this. Conservative leaders in Raleigh and Washington have given huge tax breaks to rich people and multinational corporations instead of building the systems we need to respond with a coordinated and collective set of programs.

Years of policies that attacked the very institutions that are so critical now have made the response more fragmented and challenged.  Our public health agencies are under-resourced for the growing complexities and services needed in the face of this new coronavirus pandemic coming on top of a very bad flu season. Our public schools haven’t received adequate resources to provide classroom materials and technology in school, let alone outside of it, and many school personnel are worried about their ability to make ends meet in this time. Indeed, many workers will struggle to make ends meet if their hours are scaled back, they get sick, or they lose their jobs because our policy choices have failed to provide access to affordable health care, paid sick days, and a strengthened unemployment system.

COVID-19 is likely going to have an even broader economic impact going forward and could push the United States into a full-blown recession.  Strengthening our programs that can automatically stabilize the economy by helping people make ends meet is critical, as will be aid for states to maintain balanced budgets without dramatic cuts to programs and services needed now.

In short, North Carolina will need a robust policy response at the state and federal level.

Read more

Expanding the EITC in North Carolina could save lives

Each year, the federal Earned Income Tax Credit (EITC) lifts millions of adults and children out of poverty. Given the  detrimental impact of poverty on health, there is significant research that demonstrates that the credit has a broad positive impact on many aspects of health. Expansion of the federal EITC, and refundable state-level EITCs have been shown to improve the health and wellbeing of working families by increasing nutritious food consumption, ensuring more babies are born at a healthy weight, improving physical and mental health, and reducing death by suicide.

While poor and low-income families with children have benefited tremendously from the EITC, childless workers, non-custodial parent workers, and older workers have been missing out on the EITC’s full potential for improving health and wellbeing. At its maximum value, the EITC is up to twelve times more generous for a worker with three or more children than it is for taxpayers without children.

A new report from the Institute for Taxation and Economic Policy (ITEP) highlights the state impact of increasing the value of the credit for workers without children. The report focuses on the impact of an age-enhancement for childless workers 18-24 who are just entering the workforce and generally have fewer assets and savings, workers 65 an older who are working well into retirement age, as well as increasing the value of the state credit to match 100 percent of the value of the federal credit; North Carolina does not currently have a state credit.

In North Carolina, an enhancement for young childless workers would impact more than 175,000 individuals, or more than 10 percent of the population of the state. An enhancement for workers 65 and older would impact about 46,000 North Carolinians.

Reinstating a generous and refundable state-level North Carolina EITC and enhancing the value of the credit for childless workers holds compelling potential to improve physical and mental health and decrease deaths by suicide in our state.

New research links receiving EITC with a decrease in premature deaths by suicide. A recent reversal in the historical trend of increased life expectancy in the United States has been attributed to deaths related to alcohol and drug abuse and suicide. These so called “deaths of despair” have been associated with the stress and despair resulting from stagnant wages, a lack of economic opportunity, and increased economic insecurity among individuals without a college degree. Recent research found that a 10 percent increase in EITC reduces death by suicide among adults with a high school education or less by 5.5 percent, with more pronounced effects for those populations with higher rates of EITC receipt. The impact of EITC on reducing deaths by suicide is even more significant for women, who tend to be more likely to be eligible for EITC. Specifically, the study found that a 10 percent increase in state EITC credits leads to a 7.4 percent reduction in suicide deaths among women.

Reinstatement of the North Carolina EITC, along with expansions for childless workers, has the potential to help reduce extreme financial-related stress and save lives in North Carolina.