North Carolina reduces its state EITC and allows it to expire for future years

On Wednesday, North Carolina Gov. Pat McCrory signed legislation that not only reduces the state’s Earned Income Tax Credit (EITC) from the current 5 percent to 4.5 percent of the federal credit, but also allows the credit to expire altogether at the end of 2013 as scheduled.

This is not the definitive elimination of the state EITC. A strong coalition of advocates will continue to make the case that the EITC is essential for a fair tax system and must remain part of the ongoing, broader debate about the budget and tax reform.

The repeal of the credit couldn’t come at a worse time for hard-working parents in North Carolina, who are already struggling to support their families and stay out of poverty. A parent working full-time, year-round at the minimum wage of $7.25 earns about $17,000 a year but pays more than nine cents out of every dollar they earn in state and local taxes, while the wealthiest pay only six cents.

The state EITC helps make the state tax system fairer by allowing low- and middle-income working families, who are already paying more on their hard-earned dollar than the wealthiest, to keep more of what they earn. Eliminating the credit would raise taxes on more than 900,000 North Carolinians across all of the state’s 100 counties in the face of persistently high unemployment and a statewide poverty rate of 17.8 percent.

To make matters worse, policymakers are considering eliminating the income tax, and thus the Child Tax Credit, and Child Care Tax Credit, and offsetting the lost revenues with higher sales taxes, which already hit these low- and middle-income families the hardest. If North Carolina can afford to pursue tax cuts for the state’s wealthiest households then surely it can continue to make a small investment in the state EITC that will make a big difference in the lives of hard-working families.