Earned Income Tax Credit Debated in North Carolina

The debate over instituting the Earned Income Tax Credit in North Carolina is heating up in Raleigh. The Center for a Better South endorses the EITC in last year’s report Doing Better: Progressive Tax Reform for the American South.

The federal earned income tax credit (EITC) is a program that reduces or eliminates the taxes that many working poor pay. In some cases, when the credit exceeds the amount of income taxes that a taxpayer has paid, it acts as a wage subsidy. Since 1975, the federal earned income tax credit has been more effective at lifting families out of poverty than any other government program," said MaryBe McMillan, secretary-treasurer of the North Carolina AFL-CIO, which supports establishing a North Carolina program. "And in these current economic times, there are more families teetering on the edge of poverty."

The introduction of the EITC is being met with strong opposition from conservative state representatives and policy experts.

"It's not going to keep somebody out of poverty," said Joe Coletti, fiscal policy analyst for the John Locke Foundation, a conservative think tank in Raleigh. "It's going to help at the margin. You're still going to be giving back to the person more than they paid in in income tax. It turns into welfare instead of just a tax credit. Sen. Eddie Goodall, R-Union, said in a prepared statement that under a plan where the state EITC credit would be 5 percent of the federal credit, much of the money would actually be a "welfare transfer" instead of a tax credit. “Because this allows any excess over and above the individual's North Carolina income tax to be refundable, it means even after a taxpayer pays no North Carolina income tax, they would get a bonus paid for by everyone else," Goodall said.

Many of these same arguments against the EITC in North Carolina are echoed throughout Southern Legislatures by opponents. Southern Progressives must make their voices heard to help reform the state tax systems throughout the South.