Point of View

A tax credit worth keeping

March 14, 2013 

The debate over how and where we invest our resources to make sure all North Carolinians can prosper has taken a disturbing turn. More and more we hear people argue that we can’t afford to help poor and low-income families, but that we should give tax breaks to the wealthy and profitable corporations.

Here’s a case in point. Policymakers are moving to repeal the estate tax on 23 multimillion-dollar estates in North Carolina and are determined to maintain an unwarranted cut in the income taxes that well-to-do business owners pay on their profits – together they cost $520 million. At the same time, they are saying we can’t afford to keep the state Earned Income Tax Credit that helps more than 900,000 low- and moderate-income working families keep more of what they earn to make ends meet.

Elimination of this credit that means so much to so many families would save the state $100 million.

Some also denigrate policies like the EITC and the working families that benefit from them, one columnist recently saying that the credit does nothing more “than pay people to be poor and to have more children.” That’s just plain wrong. First of all, you have to work to get the credit. Second, the effectiveness of the EITC has been thoroughly documented.

The Earned Income Tax Credit:

• Keeps people working despite low wages. It can be claimed only by people who earn income through work, and the credit is structured to encourage people to work more hours. It is built on the basic value that work is much better than welfare.

• Helps working families meet basic needs and is our nation’s single most effective tool for reducing child poverty. The federal credit lifted 293,000 North Carolinians – half of whom were kids – out of poverty 2009-2011. The number of children living in poverty would be 25 percent higher without the EITC. Our state credit builds on this success.

• Is a temporary support. Three out of five recipients claim the EITC for short periods – only one or two years. It is a good way to help families that experience temporary job loss, reduced hours or reduced pay stay on their feet.

• Has lasting benefits. Young children in families getting a boost from credits like the EITC do better and go further in school. As a result, they are more likely to work more hours and earn more money as adults.

Contrary to how the current tax debate is couched, it isn’t really about whether we can afford to support everyday North Carolinians struggling to get by on low wages or whether the EITC works. It’s about policymakers’ priorities, and every day it becomes more apparent that those priorities are seriously misplaced.

So let’s be clear: Building a strong middle class should be policymakers’ No. 1 priority. Doing so means addressing the rising and persistent poverty in our state and ensuring that working, even for low wages, is a path to opportunity and not just a dead-end street. 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.

Alexandra Forter Sirota is project director

for the N.C. Justice Center.

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