Tazra Mitchell NC Justice Center
June 27, 2014
During a recent state House Finance Committee debate, Rep. David Lewis of Harnett County made wildly false claims about the state Earned Income Tax Credit to convince his colleagues to vote down a proposed amendment that would have restored the tax credit for nearly one-million working Tar Heel families. Lewis and his fellow Republicans on the committee then soundly defeated the amendment. Barring a miraculous last minute change, North Carolina will now become the first state in the union in nearly three decades to repeal the credit (Wisconsin repealed the EITC many years ago and then later reinstated it).
The outcome of the vote was not surprising. The leadership in the General Assembly isn’t known for valuing fairness when it comes to taxes. The plan they pushed through last year—which cut taxes for the wealthiest North Carolinians at the expense of low- and middle-income residents—is proof of that. Efforts to bring back the state EITC, which provided a modest tax credit to low-wage workers before lawmakers allowed it to expire last year, are aimed at correcting some of the imbalance.
The rhetoric used to produce the outcome of the vote is what was surprising. Rep. Lewis made the absurd claim that the state EITC fails to “empower” people to work, earn money, and support their families. That could not be further from the truth. After all, it’s called the Earned Income Tax Credit for a reason: it only goes to people who work, allowing them to keep more of what they earn so they can support their families.
The state EITC builds on the successes of the federal EITC. A substantial body of research over the last fifteen years shows that the credit promotes work and fights poverty. It brings many more workers into the labor force and helps keep them on the job, by allowing them to afford things like child care and transportation. This is especially true among single moms working for low wages. In short, the EITC is an important and proven tool that boosts earnings and economic security—both of which are desperately needed by many Tar Heel workers in a state economy that is producing mostly low-wage jobs.
Rep. Lewis’ comments are part of a troubling pattern. Lawmakers have refused to let the facts get in the way of their decisions on taxes, much less guide them, at every turn.
First, they claimed that huge cuts to personal and corporate income taxes would deliver sizeable benefits to North Carolina’s economy. But that has not happened in other states in the past, and it won’t happen here. The five states that cut state taxes the most in the 1990s actually had slower job growth than other states in subsequent years, according to the Center on Budget and Policy Priorities, a non-partisan research group.
More recently, the governor of Kansas declared that deep income tax cuts in that state would be “a shot of adrenaline” to its economy, despite warnings from mainstream economists that the cuts would actually drain resources that could be used instead to bolster schools, transportation, and other proven foundations of economic growth. Two years later, Kansas is facing huge revenue shortfalls that are indeed posing a major threat to those investments.
Even before the demise of the state EITC, North Carolina’s lowest-paid workers devoted a bigger share of their income to state and local taxes than its highest earners. Without the EITC, the tax code is taking even more out of the pockets of families doing their best to work and support their children.
It doesn’t have to be this way. We can and should be doing more to help North Carolina’s lowest-paid workers make ends meet, not putting even more tax responsibility on their shoulders. Moreover, lawmakers could easily pay for such a change in the tax code by merely stopping the second round of corporate income tax rate cuts set to take effect next January.
Unfortunately, that simply isn’t going to happen until lawmakers depart from their usual pattern by facing up to the actual facts and acknowledging the benefits of the state EITC.
Tazra Mitchell is a Policy Analyst at the non-partisan NC Budget and Tax Center, a project of the NC Justice Center. She is also the Second Vice President of NC Women United.