Opinion: Legislators should reinstate tax credits for the poor

I n 2011, an estimated 6,742 low- and middle-income residents of Orange County received a check from the state to help offset the cost of their local and state tax expenditures via North Carolina’s Earned Income Tax Credit.

The payoffs were hardly extravagant — less than $100 per individual on average — but they were vital for keeping many families out of poverty, correcting for North Carolina’s regressive tax structure and maintaining consumer spending in a weak economy.

Owing to the failure of the General Assembly to renew the credit, this fiscal year, no family in North Carolina will receive these checks. North Carolina’s legislature should be ashamed of its decision to gut one of the country’s most successful anti-poverty initiatives.

Experts on both ends of the political spectrum have praised it as such. For the good of its nearly one million recipients and for the untold millions it benefits directly, North Carolina ought to reinstate the EITC.

The state EITC was originally enacted in 2007. According to a report by the Budget and Tax Center, a subdivision of the N.C. Tax Center, the credit provided a rebate to lower-income workers, who, proportionately, pay a far greater percentage of their income to state and local taxes than the wealthy do.

The federal EITC dates to 1975 and was most recently renewed in 2013. The Internal Revenue Service estimates that it keeps six million Americans, three million of whom are children, out of poverty each year. It is widely popular as a measure that incentivizes work and provides a helping hand to those in need. Most individuals who receive a credit over the course of their lifetime do so for short spurts, often of two years or less.

Of course, reinstating the credit would deprive North Carolina of needed revenue, potentially jeopardizing other recipients of state spending, like the UNC system.

Herein lies the insidious brilliance of the starve-the-beast model of governance the General Assembly provides. By slashing taxes for the highest earners, they have deprived the state of the money it needs to meet its minimum obligations to all its citizens.

Instead of viewing the EITC as sacrificed revenue, North Carolinians should instead conceptualize it as an investment in the health of their economy; after all, low- and middle-income individuals are more likely to spend a check than pocket it, and their expenditures are therefore most likely to circulate through the broader economy.

Students, even those inclined to ignore tax policy as boring and esoteric, might consider how many of their fellow Tar Heels are among the 907,000 people who benefited directly from the EITC in 2011. Policymakers should pause and ponder how it came to pass that the poor in the state need to rely on the EITC at all and redouble their efforts to create a state where everyone has access to the education, employment and opportunity to live a prosperous life.

Finally, voters should recall that North Carolina’s toast famously exhorts its citizens to let the weak grow strong and the strong grow great. By abandoning the EITC, North Carolina’s leaders suggest a commitment to different priorities. This is a lesson worth recalling come November.