MEDIA RELEASE: Senate and House tax plans will allow vital Earned Income Tax Credit to expire

Plans fail to support low-wage working North Carolina families, a new report finds

RALEIGH (June 20, 2013) — Both the North Carolina Senate and House tax plans not only offer huge tax cuts to the wealthy and profitable businesses while failing to address the state’s upside-down tax system, a new report finds, but will also allow the Earned Income Tax Credit to expire at the end of 2013.

Currently, North Carolina’s tax system provides a state EITC for low-wage working North Carolinians, which serves as a modest but vital support for over 900,000 low-wage workers, according to a new report from the Budget & Tax Center, a project of the North Carolina Justice Center. At the beginning of the 2013 legislative session, policymakers chose to reduce the value of the state EITC for tax year 2013 and allow the credit to expire at the end of this year. Both the Senate and House tax plans fail to remedy the decision to eliminate this much needed support for low-wage workers, making it even harder for them to afford basic necessities that are essential to their ability to keep working, like transportation and child care.

“North Carolina’s current tax system requires low- and moderate-income taxpayers to pay a larger share of their income in state and local taxes compared to wealthy taxpayers,” said Cedric Johnson, policy analyst with the Budget & Tax Center and author of the report. “Allowing the state EITC to expire – along with other provisions within the Senate and House tax plans that disproportionately benefit the wealthiest taxpayers – would make the state’s upside-down tax system even worse.”

The state EITC represents a modest investment relative to tax cuts being proposed for wealthy taxpayers, the report finds. Last year, the state EITC only cost $105 million, while the House and Senate tax plans spend $342 million and $1.3 billion respectively on the state's wealthiest estates and profitable corporations.

The Senate tax plan replaces the standard deduction with a zero-percent tax bracket – a poorly targeted and very costly policy which would benefit all tax filers, including millionaires – and retains the current child tax credit, the report said. However, the Senate plan eliminates the personal exemption and allows the state EITC to expire – policies that are more beneficial and targeted to low- and moderate-income taxpayers. The House plan doubles the standard deduction and increases the value of the child tax credit, and, like the Senate plan, also eliminates the personal exemption and allows the state EITC to expire.

“The tax plans currently under consideration do nothing to fix the state’s upside-down tax system, which asks more of low-income people than the wealthy,” Johnson said. “Continuing the state EITC is the best tool for addressing disparities in our tax system and is a proven way to help working families meet basic needs and improve the life chances of low-income children.”

FOR MORE INFORMATION, CONTACT: Cedric Johnson, cedric@ncjustice.org, 919.856.3192; Jeff Shaw, Director of Communications, jeff@ncjustice.org, 503.551.3615 (cell).