Consider This...

May 11, 2007

 

The N.C. House passed its version of the state budget this morning, and it includes an Earned Income Tax Credit.

A coalition of low-income persons and advocates, including the Common Sense Foundation, has been pushing hard for a state EITC, and for the first time one has made it into the budget. The state Senate now must pass its version of the budget, and the two must be reconciled.

The EITC is the best anti-poverty program available, and 20 other states (including Virginia) have one. The credit is given to workers whose income falls below a certain threshold, and it’s adjusted to give greater support to families with children.  

One key component of the EITC is its “refundable” status, which has been difficult for the far right to stomach. The federal government and most states make their EITCs refundable (which means that the poorest workers, who don’t make enough to qualify for the full credit, can get the difference in cash), and North Carolina should as well .

The arguments for a refundable credit are simple. The EITC is designed in part to offset the regressive burden of sales, excise and payroll taxes. Also, the EITC should not discriminate against the poorest working families by denying them a portion of the credit given to others. Finally, a non-refundable EITC provides little or no work incentive to families making the lowest wages (since they have little or no income tax burden).

The proposed N.C. EITC should be greater than its current amount of 5% of the federal EITC, but every little bit helps. And at an estimated cost of just $65 million, there is no better bargain in targeted tax cuts.