RALEIGH (May 17, 2013) — North Carolina lawmakers are pursuing deep tax cuts that not only benefit wealthy and profitable corporations, but also shift the tax load onto hundreds of thousands of low- and middle-income working North Carolina families, according to a new report from the Budget & Tax Center, a project of the North Carolina Justice Center.
“This tax shift is neither true tax reform nor good for North Carolina’s economy,” said Alexandra Sirota, BTC Director and author of the report. “Repealing the income tax and transitioning to a greater reliance on the sales tax would disproportionately harm low- and middle-income families, who are already asked more of by North Carolina’s tax system than those earning the most.”
Lawmakers have argued that a zero tax bracket addresses the negative impact on low-income families but the report released today finds that is not the case. A zero percent income tax bracket is more costly than the Earned Income Tax Credit (EITC), poorly targeted, and offers none of the additional benefits like support of work, reduction of child poverty, and improvement in children’s educational outcomes.
The state EITC lets them keep more of what they earn so that they can stay in the workforce despite low wages, better support their children, and avoid poverty. In doing so, the EITC reduces use of public assistance and can actually improve children’s educational achievement, educational attainment, and earnings later on in life. The EITC is mostly used as a temporary support. Research shows that three out of five recipients claim this tax credit for short periods—only one or two years.
“If lawmakers want to create a fair tax system that helps everyone – including low-income people – prosper, they should reinstate and expand the state Earned Income Tax Credit and leave behind the idea of a zero percent tax bracket,” Sirota said.
Read the full report at this link.
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