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NC Budget and Tax Center

State lawmakers once again turned their back on hardworking North Carolinians who struggle to support themselves and their families with low wages.

Yesterday, just before the House Finance Committee was scheduled to debate an economic development bill, House Bill 89, the sponsor stripped out a provision that would have reinstated the state Earned Income Tax Credit (EITC), a tax break that helps thousands of North Carolinians who work at low-wage jobs. North Carolina’s EITC expired at the end of 2013 when state lawmakers failed to extend it, and this economic development bill would have been the perfect opportunity to bring it back.

The EITC is widely recognized as one of the most effective anti-poverty tools nationwide, especially for children. Nearly 907,000 North Carolinians claimed the state EITC for tax year 2012, benefiting nearly 1.2 million children and providing a $108 million economic boost to local communities across the state.

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The bill sponsor, Rep. Moore, informed House Finance Committee members that the state EITC provision was excluded from the revised bill in order to increase the chances of the bill gaining bipartisan support among state lawmakers. Read More

Commentary

Working PoorOne of the great myths of the American policy debate is that poor people are poor because they don’t (or won’t) work. While it’s true that unemployment is still a huge problem in many places, it’s also true (and increasingly so) that work is no panacea — especially for people of color.  This is especially and tragically true in states like North Carolina.

For the latest confirmation of this harsh reality, be sure this morning to check out a this new data-rich report by the Working Poor Families Project entitled “Low-income working families: The racial/ethnic divide.” The report  documents how race and ethnicity factor into the poverty of working families and, among other things, highlights the widening gap between white and minority families since the start of the Great Recession. It also looks at differences by geography. Here are the key findings:

  • Among the 10.6 million low-income working families in America, racial/ethnic minorities constitute 58 percent, despite only making up 40 percent of all working families nationwide.
  • The economic gap between white and all minority working families is now 25 percentage points and has grown since the onset of the recession.
  • There are 24 million children in low-income working families and 14 million, well over half, are racial/ethnic minorities.
  • Over 50 percent of Latino, low-income working families have a parent without a high school equivalency degree, compared with 16 percent of whites.
  • Working families headed by minorities have higher incomes in the Mid-Atlantic region, Alaska, Hawaii and parts of the Northeast, compared with minority working families in the upper Midwest and Mississippi Delta regions

Sadly, North Carolina doesn’t fare as well as the “Mid-Atlantic” region. According to the report, more than half (55%) of working families in our state who are racial and ethnic minorities fail to bring home a true “living income” — i.e 200% or more of the official federal “poverty” threshold.  The national average is 47.5% for racial and ethnic minorities. The report also highlights North Carolina’s recent repeal of the state Earned Income Tax Credit as a contributor to this deplorable situation.

Click here to read the entire report. State-by-state data can be found on page 14.

NC Budget and Tax Center

On Wednesday, the Senate Finance committee heard presentations that made the case for more changes to the state’s tax code. While beginning with many of the economic realities in North Carolina—stagnant and falling wages, persistently high poverty, and slow growth— the presentation prescribes the wrong medicine: more cuts to the income tax in favor of applying the sales tax to more goods and services.

It’s a surprising conclusion to reach as prior “reform” efforts based on income tax cuts for the wealthy and profitable corporations have not allowed North Carolina to invest in the state’s economic recovery. It’s even worse with evidence mounting that shifting more of the tax load onto average people is causing real damage.

It’s clear that more tax cuts for the wealthy and profitable corporations aren’t the best tools to address the economic issues highlighted in the presentation. Tax cuts do nothing to address the fact that workers aren’t seeing their wages grow, despite increasing productivity. Tax cuts that primarily benefit the wealthy and profitable corporations do not help alleviate poverty. Instead, such an approach jeopardizes the ability of the state to invest in pathways to opportunity—the schools, research and development, and business start-ups that create a vibrant economy.

We have long advocated for tax reform, and a genuine and thoughtful plan to modernize our tax code is still needed today – not in spite of 2013 tax changes, but because of them. But shifting the state away from the income tax to rely more on sales taxes, as the leadership presented yesterday, will make things worse, not better. It will not help address the ups and downs in revenue collections and will mean that everyday North Carolinians carry more of the tax load while wealthy taxpayers get a tax cut. This is especially true if such tax shifts don’t seek to offset a greater reliance on sales tax with a strong state EITC.

Here is what should be the focus of legislators’ reform efforts: Read More

Commentary

EITC_ncToday marks a little known “holiday”: Earned Income Tax Credit (EITC) Awareness Day. The IRS-led national event is intended – as the title implies – to spread awareness about this modest but vital tax credit and make sure that all qualified workers receive it. The day is as much about educating people as to what exactly the EITC is as it is about directing individuals to sites where they can get free tax help to claim the credit. For those that do, often for just two or three years, it can mean the difference between struggling for another year and getting back on your feet.

In North Carolina, however, the day isn’t so simple. In fact it’s hard to find cause for celebration in the only state in the country to have eliminated the credit.

There are plenty of individuals who are fully aware of what the EITC means for their own lives as well as those of their neighbors, despite its absence in the Tar Heel state. Last year, NC Justice Center staff spoke to individuals across the state that had been directly impacted by the credit and acutely felt the loss of the EITC.

They talked about how the EITC arrived at the perfect moment in their lives: when they gave birth to a child with medical needs and struggled to pay hospital bills; when they were stuck in a low-wage job that wouldn’t allow them to save enough to pay off their debts; or when they were hoping to finally become a homeowner after relying on family and friends for shelter. These were all working North Carolinians. Their stories were familiar and at times heartbreaking. Some are still struggling, and others saw their families lifted out of poverty thanks in part to the EITC. They are the individuals who once relied on the EITC and urge policymakers to reinstate the credit – not only for themselves, but so that other families can feel the benefits.

A few basic facts on the state EITC that bear repeating: Read More

NC Budget and Tax Center, Poverty and Income Data 2013, Poverty and Policy Matters

Children face the highest poverty rate in North Carolina compared to other age groups according to data released last week by the US Census Bureau. After more than five years into an economic recovery, one in four children (25.2%) in North Carolina remained in poverty in 2013 –unchanged from 2012 and higher than the national child poverty rate (22%). At a time when we are experiencing an economic recovery, it is troubling that our state’s child poverty rate is not declining and remains significantly higher than the national average.

The numbers become even more meaningful when considering the disadvantages children in poverty face: less access to early education programs and high quality schools, food insecurity, higher stress levels and higher dropout rates, among other risk factors. Recent findings in brain development research also warn of the impact of toxic stress associated with poverty on a young child’s developing brain. Toxic stress can weaken the architecture of a child’s brain, creating long-term challenges that make it hard for one to be economically secure as an adult. Other numbers are rising for children across the nation and in North Carolina that we certainly don’t want to see on the rise. Infant mortality and child mortality has increased in North Carolina. There has also been a rise in the number of homeless school children, according to recently released national data. Both are indicators of poverty’s tight grasp on America’s and North Carolina’s children.

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