Don't weaken Earned Income Tax Credit

  • Posted: Thursday, April 28, 2011 12:01 a.m.
    UPDATED: Sunday, October 23, 2011 12:18 a.m.

By Alexandra Sirota
N.C. Budget & Tax Center
North Carolina needs a strong middle class to build a thriving economy. Unfortunately, there is a push in our state legislature to undermine a policy that is absolutely critical to achieving that vision: the Earned Income Tax Credit (EITC).
The EITC benefits North Carolina’s low-wage working families. Because these families pay a greater share of their income in taxes than even the richest North Carolinians, this targeted credit helps make our tax system fairer while putting money into the hands of hardworking people who can use it most.
The result is an infusion of capital into local economies around the state, an increased chance that families can make ends meet, and a greater chance for low-wage workers to access the middle class.
These are just a few reasons that the EITC has generated broad support from people of all political persuasions. Even Ronald Reagan called it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”
That’s why it’s so shocking that some people are pushing to gut North Carolina’s EITC. These proposals amount to a tax increase on North Carolina’s working families and a harmful blow to economies throughout our state.
It’s even more shocking that we’d consider this while leaders are talking about cutting corporate tax rates. To do so would cost the state many times more revenue than the EITC does, while doing almost nothing to create jobs.
Slashing taxes on profitable corporations while effectively raising taxes on low-wage workers is bad for the economy.
By the time it was implemented at the current level in North Carolina in 2009, the credit put more than $50 million into our communities and offered more than 880,000 working families more income to spend at local businesses.
Because people struggling to make ends meet are more likely to spend these dollars, the EITC is a direct and immediate stimulus to local economies. Those working families get to pay for basic necessities, and North Carolina businesses get to reap the benefits. It’s a win-win situation for our economy.
But a good deal of misinformation about the EITC persists. Some claim, contrary to the facts, that working families aren’t paying their fair share.
This claim isn’t based in reality. In North Carolina, working families who qualify for the EITC pay a greater share of their income in taxes than the wealthiest do. They pay about 9.5 percent of their income to total state and local taxes. Compare this to the 6.8 percent paid by the highest 1 percent of income earners in North Carolina. The EITC levels the playing field and gives working families a chance to get ahead.
If we maintain this common-sense policy, North Carolina’s economy will grow stronger. Our state works best when working families prosper. That’s why we should strengthen, not weaken, our EITC.
On the other hand, if we give in to pressure to gut the credit, one in 10 North Carolina households would experience an effective tax increase — and they would be the households least able to afford it. North Carolina’s most valuable asset is its working families. It’s time to maintain our investments in them.
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Alexandra Sirota is the Director of the North CarolinaBudget & Tax Center. This article was distributed through the North Carolina Editorial Forum, a nonprofit, nonpartisan, educational organization.

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