New reports: Together, state EITC and adequate minimum wage work to strengthen families, and boost the economy

North Carolina’s working families face stagnant wages and rising costs for basic necessities like housing, child care, and transportation.

According to a new report from the Center on Budget & Policy Priorities, adopting a state EITC, to complement the federal credit and strengthening the state’s minimum wage will boost incomes for families that work low-wage jobs. In tandem, these policy tools have an especially positive impact on the financial well-being of families that struggle to make ends meet.

A few findings from the report:

  • Wages remain largely stagnant. Although productivity has increased markedly, low-wage workers have seen negligent gains in income over the past four decades. While the wealthiest have enjoyed the benefits of economic growth, low and middle-income workers have not.
  • Raising minimum wage and adopting state EITC work to address this income inequality, and reduce poverty among children. EITC is one of the most effective tools to lift working families and children out of poverty, keeping 5.7 million out of poverty. The federal minimum wage, used as a guide for states, has not kept pace with the rising cost of living. Increasing the minimum wage to $15 over the next five years would positively impact the ability of 28.1 million workers to cover the costs of day-to-day life.
  • Twenty-nine states and the District of Columbia have already enacted the EITC, and are experiencing its benefits, while 21 states are on pace to raise minimum wage in 2019.
  • Together, these policies reach overlapping but different populations, and allow the public and private sectors to share the cost.

A complimentary report from the Center on Budget & Policy Priorities highlights the positive economic impact of adopting a state EITC, focusing on the workforce, tax, and anti-poverty implications of the tax credit.

The report finds that adopting a state EITC improves the future economic prospects of children in claiming families, helps those families cover costs associated with continued work, like childcare and transportation, and encourages lowest-earning families to work more hours. A state EITC would also help offset the increase tax burden low and middle-income families bear in relation to wealthier tax payers.

Proposals have been introduced in the North Carolina House and Senate to establish a state EITC.  Given this emerging research and the challenges facing working families in our state, let’s hope both get a hearing soon.

Heba Atwa is a policy advocate for the N.C. Justice Center’s Budget & Tax Center.

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