By Tazra Mitchell
Guest Editorial 

N.C. Needs Earned Income Tax Credit

 


This month marks a setback for low-income working families across North Carolina, but especially in rural areas: just one year ago, Gov. McCrory signed a bill ending the state’s Earned Income Tax Credit (EITC), and unless lawmakers reverse course, nearly one million North Carolina families will claim the EITC for the last time this tax season. Roughly half of these families live in rural parts of the state.

This tax credit goes to families that work but earn low wages, and helps them keep more of what they earn so that they can support their children, get a foothold in the labor market, and avoid public assistance.

Lawmakers not only axed the EITC last year, but they also enacted major income tax cuts that primarily benefit the wealthy and profitable corporations. As a result, many low-income families—despite working hard in a broken economy—can expect fewer dollars in their pockets to help them make ends meet and avoid raising their children in poverty.


It is in the state’s rural areas where the most EITC recipients live as a share of all tax filers, particularly in the eastern parts of the state that have traditionally suffered from economic hardship and lack of opportunity. In 15 of our 85 rural counties, the need is high: at least 1 in 3 tax filers in these counties claim the EITC and over 100,000 children benefit. This is significantly higher than in urban areas such as Wake County where about 1 in 7 tax filers claim the credit. All told, nearly a half a million EITC-eligible workers in rural North Carolina will have less to get by on next year due to the loss of this modest but vital tax credit.

The EITC’s absence will also dampen the economic outlook for small businesses, too. The EITC has enjoyed support from the business community because it helps low-wage employees afford things that make it possible to work, like transportation and child care. It also allows families all across the state to keep a bit more of their wages, which they spend on basic necessities and services at local businesses—such as groceries and car repairs. Both of these benefits are especially important in struggling rural areas of our state, where local businesses depend heavily on working families in the community as both workers and customers.


Rural areas are arguably still in the grips of the recession: there are fewer rural people employed now than at the beginning of the economic recovery. That means that many families have lost one of their breadwinners. Many others are working fewer hours or for less money than before the recession. The long-term trend away from manufacturing jobs—which were historically concentrated in rural and small metropolitan areas—and toward service employment is a major reason the recovery is lagging in rural areas. With too few jobs and jobs that don’t pay enough to support a family, it is difficult for working families to remain in rural communities and thrive. The EITC provides help to these families, and in so doing, provides a stabilizing force in rural communities.

And children benefit too: the state EITC builds on the success of the federal tax credit, which is the nation’s most effective tool for reducing child poverty. In fact, the benefits are long lasting. Children living in families with additional income from programs like the EITC do better and go further in school, and they work more and earn more as adults.

State lawmakers should invest in what works, and we know that the state EITC is a well-targeted tax credit that helps North Carolina’s families and local economies. When it comes to being the first in flight for a manned aircraft, blazing the trail is a notable achievement in North Carolina’s history. However, being the first state to eliminate a state EITC in nearly 30 years, now that’s a different story. We should be supporting North Carolina’s lowest-paid workers, not further shifting the tax load onto their shoulders.

It’s not too late to reverse course on the EITC. State lawmakers should reinstate the EITC in the upcoming legislative session in May so that working families can continue to claim this modest but critical support during the next tax season.

(Tazra Mitchell is a policy analyst at the Budget & Tax Center, a project of the N.C. Justice Center, and will speak at the county library next week.)

 
 

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