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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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Falling Behind in NC, NC Budget and Tax Center

Lawmakers let the state Earned Income Tax Credit expire at the end of 2013, making North Carolina the first state in nearly 30 years to eliminate this proven anti-poverty tool. The state EITC helps promote shared economic prosperity for all North Carolinians. It goes only to working people with modest incomes, offering extra support to pay for basic necessities.

In a new video from the series “North Carolina: First in Flight from the EITC,” Heather Partridge talks about how the state EITC has helped her family. Heather lives with her husband and three daughters in Gibsonville, where she works at Hardee’s and earns $7.55 an hour – just barely above the state minimum wage of $7.25. In past years, the EITC has helped Heather pay for everyday goods for her children as well as pay off debt.  Read More

Falling Behind in NC, NC Budget and Tax Center

As North Carolina continues to recover from the Great Recession, most of the jobs that have been added pay low wages, making affording even basic necessities difficult for many hard-working North Carolinians. Raising the state minimum wage and reinstating a state Earned Income Tax Credit (EITC) are two policy tools that North Carolina state lawmakers can use to help boost wages, widen the path out of poverty, and reduce income inequality, a report released this week by the Center on Budget and Policy Priorities (CBPP) highlights.

Wages for the least paid workers are no higher than they were 40 years ago, the CBPP report highlights. Yet evidence shows that lifting the income of families earning low wages provides a range of benefits, including improved learning and educational attainment and higher future earnings in adulthood for low-income young children. Furthermore, raising the minimum wage and an enhanced state EITC together works to put families and individuals on a path to financial stability and self-sufficiency. Read More