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NC Budget and Tax Center

Elizabeth Malm, an economist with the conservative Tax Foundation, yesterday voiced support for the Earned Income Tax Credit (EITC) at a debate about tax reform in North Carolina, highlighting how out-of-touch North Carolina’s leadership is when it comes to its treatment of working families in tax reform efforts.

The EITC, which goes to families that work but struggle to get by due to low wages and helps them pay for basic necessities, has received backing from politicians of all stripes over the years including President Ronald Reagan. It’s not hard to see why since this modest tax credit reduces child poverty, improves kids’ chances of success as adults, and lessens the need for public assistance.

Ms. Malm’s backing of the EITC stands in stark contrast to the actions of Governor McCrory and legislative leadership, who already gave the OK to reduce the state EITC in tax year 2013 and eliminate the tax credit thereafter. This misguided decision will result in a tax hike on more than 900,000 of North Carolina’s lowest-paid workers and their families. Read More

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As part of the generalized War on the Poor that they’ve been waging in recent weeks, state lawmakers have taken aim on the state Earned Income Tax Credit — an efficient program that provides workers earning low wages with a credit to offset their total state and local tax contributions.

Two new items documenting the folly of this action are worth a look this morning:

#1 is this op-ed in today’s edition of Raleigh’s News & Observer by Budget and Tax Center Director, Alexandra Sirota. As she notes:

“The EITC is an effective tool for keeping children and their families out of poverty, and it helps families keep working and on the path to the middle class.”

#2 is this new interactive infographic on the main Policy Watch site. It allows you to use your computer mouse to hover over any county in the state and get a glimpse of the credit’s impact.

Let’s hope state policymakers start paying attention to these compelling arguments.

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Be sure to check out the Fitzsimon File this morning, where Chris has some of the latest U.S. poverty numbers as well as data surrounding one of the country’s best anti-poverty tools — the Earned Income Tax Credit. Not surprisingly, given the tenor of the 2013 legislative session thus far, the state version of the credit is on the chopping block for conservatives running the General Assembly — i.e. the same folks who are already moving to repeal the estate tax (which only impacts a tiny fraction of the wealthiest estates in North Carolina).

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And speaking of regressive, counter-productive tax policies, check out this new report released this morning, which shows that recent proposals from Republican leaders in the U.S. House and Senate would extend lucrative tax breaks for 140 multi-million-dollar estates in North Carolina while letting tax improvements expire for 522,645 moderate-income North Carolina working families with 1.1 million children.

Sounds like pretty standard right-wing trickledown/flood-up economics.

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A new report by the good folks at the Institute on Taxation and Economic Policy provides a clear roadmap for how state policymakers can use smart tax policy to fight poverty.

The recent news of the US poverty rate reaching its second-highest level since 1965 – with the share of Americans living in deep poverty the highest on record – underscores the dire need for tax policies at all levels that work to combat poverty.  Yet state and local tax policy in most states actually contributes to increasing poverty rather than lifting families out of poverty.  That’s because low-income families in most states pay a larger share of their income in state and local taxes than middle- or high-income households.

Although North Carolina taxes low-income households slightly less heavily than average (due primarily to the state’s relatively progressive income tax and the Earned Income Tax Credit [EITC]),  low- and moderate-income North Carolinians still pay significantly more of their income in state and local taxes than high-income North Carolinians.

To rectify the problem of North Carolina’s upside-down tax system, the new report suggests the following strategies to state policymakers:

  • Increase the state Earned Income Tax Credit
  • Increase the state Child and Dependent Care Credit and make it refundable
  • Make the state Child Tax Credit refundable
  • Create a Low-Income Property Tax Circuit Breaker
  • Create a state refundable low-income credit to complement the EITC

As the report makes clear, fighting poverty with refundable tax credits is a proven, cost-effective strategy with a long history of support from both Republicans and Democrats.  Particularly at a time when poverty is increasing at an alarming rate, state policymakers could use refundable tax credits to provide a much-needed boost to families struggling to make ends meet in an unforgiving economy.