Prosperity Watch Issue 53, No. 3: Saving Critical Components of Pro-Work Tax Credits Would Help Low-Wage Workers in North Carolina

September 15, 2015

North Carolina’s low-wage recovery is making it impossible for families to make ends meet and is thus weakening the strength of the economy. The average North Carolinian is not experiencing wage growth and poverty is stuck high for families and communities across the state—but public policy can improve well-being for workers and their families. Congressional lawmakers returned to Capitol Hill this month and they alone can help 523,000 North Carolina families by saving key provisions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) that are scheduled to expire at the end of 2017.

These tax credits can help put low-wage workers on the path to economic security by putting money back into the pockets of workers who have earned it. There are three key provisions that are scheduled to expire, including: 1) a lower earnings threshold of $3,000 (versus $14,500) that expands the CTC for very low-income families; 2) a change to the threshold that allows married couples better access to the EITC; and 3) an increased value of the EITC for families with more than two children.

If Congress lets these key provisions of the EITC and CTC expire, working families will lose a crucial piece of their family budgets. In North Carolina, those families are more likely to be in industries where administrative assistants, cashiers, textile workers, waiters, child care workers and teachers work.  

 
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As just one example, a worker with two children working as a health aide taking care of older adults and earning the minimum wage would lose about $1,725—her entire CTC—in 2018, according to the Center on Budget and Policy Priorities.  That’s equivalent to the cost of food and childcare for one month for the average 3-person family in North Carolina. The Center also found that 429,000 North Carolinians—including 206,000 children—would be pushed into poverty or made poorer if Congress decides not to take action and make these provisions permanent.

For families making impossible tradeoffs between putting food on the table and paying rent, these tax credits make a substantial difference by offsetting payroll, income, and sales taxes that families pay. By doing so these tax credits support work, increase wages, and reduce poverty. Boosting income means that workers can better meet basic needs and pay for the things that allow them to work and improve their family’s situation, such as child care and transportation and it means a stronger economy for us all.

 

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