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North Carolina Should Reinstate Its EITC

May 13, 2013 at 4:04 PM

The Tax Foundation's Elizabeth Malm recently expressed concern on an issue about which we have already weighed in -- North Carolina's decision in March to eliminate its Earned Income Tax Credit (EITC), which provides important support for low-wage working families. Before we get to Malm, here's what you need to know:

North Carolina ended the credit as of next year, which will mean a tax hike for 900,000 working households, most of them with children to support. Adding insult to injury, policymakers also cut the credit for this, its last year on the books, from 5 percent of the federal credit to 4.5 percent, shrinking an already modest benefit.

I wrote in February about the harm that this action would cause to North Carolina's struggling working families -- at a time when the state had just slashed its unemployment benefits and while lawmakers were considering eliminating the estate tax that's levied on just 23 of North Carolina's wealthiest estates.

At a recent debate, Malm described regressivity as "a very important concern" and cited the EITC as "one way that we can mitigate the regressivity concerns that do come up when we think about reducing the income tax." Malm and CBPP Senior Fellow Jared Bernstein agreed that North Carolina should revisit its decision to eliminate the EITC.

Meanwhile, the state will likely eliminate its estate tax, and lawmakers are considering major tax plans that would force low-income families to pay a greater share of their income in taxes while reducing the taxes of the wealthiest North Carolinians. They should rethink tax cuts for the wealthy, especially when they come at the expense of tax credits like the EITC that help working families support themselves.


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