CHAPEL HILL - In a move to build on the impressive success of the federal Earned Income Tax Credit (EITC), the state House voted to include a state EITC -- aptly named the North Carolina Rewarding Work Tax Credit -- in its budget bill. Unfortunately, the Senate chose to ignore this House initiative to bring much-needed relief to working families burdened by rising costs and stagnant incomes. In the upcoming budget reconciliation process, we ask that the General Assembly approve the EITC to provide greater tax fairness to an increasingly unfair state tax system.

Implemented under President Ford and expanded by Presidents Reagan, Bush Sr. and Clinton, the EITC has earned bipartisan support because of its high participation rate by eligible working families and its proven record in both encouraging work and increasing tax fairness. Reagan called the legislation "the best anti-poverty bill, the best pro-family measure, and the best job creation measure to come out of the Congress of the United States." The EITC serves two purposes.

* FIRST, IT PROVIDES GREATER FAIRNESS IN THE TAX CODE, because low- and moderate-income workers pay a disproportionate share of payroll taxes as well as state and local taxes.

How is that? North Carolina's state and local tax system has become more regressive. According to research by the N.C. Budget and Tax Center, the bottom 20 percent of taxpayers pay 10.9 percent of their income to state and local taxes, while the top 1 percent pay only 6.3 percent. This trend has worsened over time. North Carolina's poorest households experienced a net tax liability increase between 1989 and 2002, the only income group to see an increase.

* SECOND, THE EITC MAKES WORK PAY by supplementing the wages of low- and moderate-income workers so that a family supported by a full-time minimum wage worker does not have to raise its children in poverty.

With wages failing to keep pace with the soaring costs of basic necessities such as housing, health care and energy, the EITC has been a critical factor. Families use the credit to pay for necessities, to repair homes and vehicles needed to commute to work and to boost their earning power by investing in education or training. These investments pay off in a more stable work-force and more stable communities.

If North Carolina wisely implements a state EITC, it will join 20 other states and the District of Columbia in doing so. The current proposal is pegged at 5 percent of the federal EITC, small in comparison to many other states but an important step.

A state EITC is easy to administer because it piggybacks on the federal program. Adding it to the state tax code requires only adding one line to the North Carolina income tax form.

A combined federal and state EITC can make a significant difference in improving the lives of more than 825,000 working-class families in North Carolina. The benefits will reach families in all 100 counties, especially helping both rural and urban high poverty areas where the increased local spending will benefit disadvantaged neighborhoods and communities. We ask the Senate to join the House in passing an EITC to help the families who need it the most.

(Lucy Gorham is director of the EITC Carolinas initiative at MDC, Inc. in Chapel Hill. EITC Carolinas supports a network of free tax preparation sites that help working families.)