Making Work Pay for North Carolina’s Low- and Middle-Income Working Families

Report Date: 2007
By Meg Gray

REPORT SUMMARY:

* The federal EITC helps low- and moderate-income workers support families, lifts millions out of poverty and increases tax fairness.

* One out of five North Carolina working families benefit from the federal EITC. Sixty-nine percent of North Carolina EITC claimants earn less than $20,000 annually. These same families would benefit from a state EITC.

* A North Carolina state EITC would further the Federal EITC’s impact. In fiscal year 2007-2008, a North Carolina EITC set at 10 percent of the federal EITC would provide close to $134 million to North Carolina working families, with an average benefit of $163.

* A state EITC would improve tax fairness by reducing the disproportionate share of income that low- and moderate-income workers pay in state and local taxes. In 2003, the bottom 20 percent of North Carolina taxpayers paid 10.9 percent of their incomes in state and local taxes while the top 1 percent of taxpayers paid only 6.3 percent.

* A North Carolina EITC would have very low administrative costs–less than one percent of the total cost of the program.