Tax Credits for Working Families Deliver Broad Benefits to the State

April 2015

One year ago, North Carolina’s working families claimed a tax credit for the last time that helped them make ends meet in an off-kilter economy. The state Earned Income Tax Credit (EITC) went to families that work but earn low wages, and helped them keep more of what they earned so that they could stay in the workforce, support their children, and avoid poverty and public assistance. Lawmakers put an end to the tax credit in 2013 and subsequently pursued deep income tax cuts that primarily benefited the wealthy and profitable businesses.

The North Carolina EITC was a vital facet of the state’s tax system, building off of the federal tax credit—one of the nation’s most powerful anti-poverty tools for children. The benefits of the state EITC extended to the broader economy by promoting work and helping families afford things that make it possible to work, such as gas and child care. The tax credit also helped address how the state asks its lowest-paid workers to pay more as a share of their income in state and local taxes than its highest earners. Without the state EITC, North Carolina’s tax system now asks nearly 1.75 times more from the bottom 20 percent of taxpayers as it does from the top 1 percent.