March 1, 2013
EITC is a crucial piece of the tax reform puzzle
The Earned Income Tax Credit is a powerful anti-poverty tool that must be protected by state lawmakers as they consider changes to the tax code. That message was the focus of a press conference a coalition of organizations led by the NC Budget and Tax Center and the United Way of North Carolina, and including the NC State AFL-CIO, held in Raleigh this week.
You have to work to claim the credit, so the EITC provides a modest but stabilizing support only for taxpayers who work but earn low-incomes. Nearly 907,000 hardworking North Carolinians claimed the credit in 2011 in each of the state’s 100 counties. Click here to see how much money the state EITC brings to your county.
The credit helps boost the power of the federal EITC, which lifted 5.7 million Americans out of poverty last year – 3.1 million of whom were children.
North Carolina’s EITC is worth 5% of the federal EITC, so a family receiving a $2,000 federal credit would get a $100 state credit. It may not sound like much to you, but when almost a million low-income North Carolinians get that credit and spend it on life’s basic necessities, it all added up to a total stimulus of $105 million in 2011 – a big economic boon for working families and for the state and local economies.
Read the Budget & Tax Center brief, North Carolina’s Earned Income Tax Credit: A Modest but Vital Boost to Low-Paid Workers across the State (opens PDF).
Even with our state’s EITC, low and moderate-income workers still pay a higher percentage of their incomes in state and local taxes than wealthy do. Workers earning $50,000 a year pay 9% of their income in taxes versus the 7% paid by people earning $800,000 a year. Cutting the value of the EITC or allowing it to expire altogether would make matters worse.
Unfortunately, Republican state lawmakers have filed House Bill 82, which would cut the state EITC for 2013.
Meanwhile, a bill offered by Democratic lawmakers to extend the sunset of the EITC, currently set to expire in 2014, is stuck in committee.