The long-term benefits of the Earned Income Tax Credit

May 3, 2013 at 4:33 pmCategory:NC Budget and Tax Center

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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. Read More…

State lawmakers seek to restrict NC Pre-K eligibility based on flawed poverty threshold

May 1, 2013 at 9:56 amCategory:NC Budget and Tax Center

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Yet again, North Carolina legislators are moving a bill (HB 935) through the House chamber that would limit participation in NC Pre-K, the state’s nationally-ranked public pre-kindergarten program. The bill would lower the “at-risk” eligibility standard to 100 percent of the federal poverty line (FPL), which is $23,550 for a family of four. The current income threshold is set at three-fourths of the state median income, or nearly one-third higher than the FPL for a family of four. Even the existing threshold falls short. Research shows that families up to, and sometimes above, twice the FPL experience many of the same material hardship as families who are poor, meaning they too struggle to make ends meet and secure the basics for their children.

A change in the income threshold would close the door on early learning for approximately one-third—or 10,000—of the children currently enrolled in the NC Pre-K program. There are nearly 11,700 children on the waiting list. Read More…

Kentucky experience indicates that anti-immigrant bills cost taxpayers and communities

April 29, 2013 at 1:16 pmCategory:NC Budget and Tax Center

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North Carolina legislators are considering an anti-immigrant bill (HB 786) that would impose new law enforcement costs on state and local governments and could result in additional consequences in the state’s communities. The Arizona-style “show me your papers” provision and other enforcement measures in this bill would take away from other investments state and local governments need to make—as this fact sheet points out.

States that considered or enacted similar restrictive immigration laws and enforcement mechanisms have faced real costs to implementing such laws. In fact, the estimated cost of an anti-immigrant bill filed in Kentucky in 2011 raised concerns among stakeholders and the bill ultimately failed to make its way to the Governor’s desk.

This Kentucky bill comprised many of the core provisions that are in HB 786, including the “show me your papers” provision, the authorized seizure of vehicles during certain illegal activities, and new and ramped up criminal penalties. Read More…

North Carolina’s revenue forecast confirms the importance of the income tax

April 23, 2013 at 3:11 pmCategory:NC Budget and Tax Center

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The revised revenue forecast released today demonstrates how important the income tax is to our state’s ability to make investments that boost our economy. As legislators begin building the next state budget, they should protect the income tax, not scale it back or eliminate it as some have proposed.

The revenue forecast indicates that tax collections since the beginning of 2013 are on target to pay for critical services included in the Fiscal Year 2012-13 budget, thanks to the revenue generated by the personal income tax. The personal income tax has been the most consistent source of revenue to pay for education, transportation, and public safety in North Carolina, and recovered quickly after the Great Recession, according to the report released today by the non-partisan Fiscal Research Division.

Sales taxes have not rebounded nearly as well because consumer demand continues to be weighed down by economic concerns, including the state’s high unemployment rate. Read More…

Could McCrory’s budget adequately cope with sequestration?

April 13, 2013 at 11:07 amCategory:NC Budget and Tax Center

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It has been a few weeks since Governor McCrory released his budget proposal for the biennium that runs from July 2013 to June 2015. His proposal has received a lot of praise for building up the state’s various savings reserves, including the Rainy Day Fund, the Medicaid Risk Reserve, and the Repair and Renovations Fund.

What has been less widely scrutinized is whether the reserves in his proposal would be sufficient to cope with the first and potentially second rounds of damaging sequestration cuts to defense and non-defense programs. Read More…