Prosperity Watch Issue 49, No. 1: Working Family Tax Credits Help 763,000 North Carolina Moms

Working moms in North Carolina face significant financial challenges in supporting their children’s healthy development and their family’s economic stability.  They earn, on average, less than men and often serve as the sole breadwinner, struggling to balance the costs of high quality child care and after school programs, transportation to and from school and work, and basic necessities like food and housing. Public policies that help working moms make ends meet on low-wages make a difference not just in women’s work life but in the lifelong economic outcomes of children and the future of the state.

Tax credits helped 22 million low- and moderate-income working moms make ends meet nationwide in 2013, according to a new report from the Washington, DC-based Center on Budget and Policy Priorities. Roughly 763,000 North Carolina moms benefit from the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) this Mother’s Day, which combined lifted 378,000 North Carolinians out of poverty in 2013.

Unfortunately, the elimination of the state EITC means that these more than 760,000 mothers are not benefiting from a state EITC that built on the success of the federal credit. This is particularly concerning because we know that low-wage mothers pay a larger share of their incomes in local and state taxes than affluent households do in most states, and the state EITC is one way we can address this problem. On average, the bottom fifth of households pay 10.9 percent of their incomes in state and local taxes as compared to 5.4 percent for the top 1 percent of income-earners. Its elimination means the additional modest boost from the state EITC is not available to support working families as they spend money on basic necessities, in turn boosting local economies.

The CTC works by providing a credit for taxpayers with children, which at the federal level is phased out for higher income taxpayers and refundable for low-income taxpayers. At the state level, the credit is $100 per child while an additional small boost of $25 is delivered to those earning less than $40,000 as a result of tax changes in 2013. When combined with the EITC, the CTC provides support for families who have limited resources to provide for their children’s basic needs and to achieve key developmental milestones.

Families have to be working to receive both of these crucial credits. Research has shown that kids whose moms and families benefit from the EITC and CTC are healthier, do better in school, and are more readily able to afford college. Working moms who receive the credits are more likely to stay connected to the labor force and earn more to secure their future retirement. For every $3,000 more in resources available to households with children under 6, their lifetime work hours and earnings increase significantly.

This Mother’s Day, tax credits for working families are working to help ensure that the next generation of North Carolina’s leaders, workers, and neighbors are doing well and reaching key milestones on the way to successful futures.  These policies represent an effective and demonstrated tool for addressing poverty and paving a pathway to a stronger economy for all.

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