The North Carolina Senate and House have been negotiating on a tax reform plan that may not include the earned income tax credit (EITC) — which will affect many residents of Lenoir County.
The EITC is a benefit for working people who have low to moderate income. In an IRS report, $105 million was awarded to those who qualified for the tax break in North Carolina last year.
Lenoir County received slightly less than $1 million for its 7,800 workers who fell under that category. The county also had one of the highest rates in the state of those filing for EITC — 32 percent of its workers claimed refundable tax credits.
In March, the legislature agreed to eliminate the EITC after this year. Although there was some deliberation on bringing the tax plan back, neither the House nor Senate has the EITC in their tax reforms.
The budget is projected to be approved by the July 1 deadline. When that happens, about 900,000 workers in the state will have to eliminate compensation from the EITC starting in 2014.
“The legislature passed a stand-alone bill, allowing it to expire by the end of 2013,” said Cedric Johnson, NC Budget and Tax Center policy analyst. “Another viable option is through tax reform plans, but neither side has it and the EITC hasn’t been considered.”
What has been considered — and is on the verge of being passed — are tax cuts for corporations and estates. The House has plans to spend about $342 million in tax cuts, while the Senate is looking at $1.3 billion.
On Thursday, Johnson wrote a media release to the North Carolina Justice Center website saying “The tax plans currently under consideration do nothing to fix the state’s upside-down tax system, which asks more of low-income people than the wealthy. Continuing the state EITC is the best tool for addressing disparities in our tax system and is a proven way to help keep working families meet basic needs and improve the life chances of low-income children.”
In a statement to the Free Press on Monday, Johnson said he was trying to figure out why the legislature was still phasing out the EITC.
“It’s important that this program reaches low-income workers because it gives them encouragement,” Johnson said. “The fact we’re willing to give this away while giving it to the wealthiest doesn’t really make sense. They say the EITC is too costly, but how can the state afford these massive tax cuts?”
N.C. Sen. Louis Pate has a different view of the EITC, believing that unemployment is a bigger issue in the state.
“I can’t say that I’m in favor of it because we’re supplementing income of taxpayers who have low income and the state is subsidizing,” Pate said. “People would rather have jobs with decent wages, so our main focus is making sure everyone who is able and willing to work can be employed.”
While deliberations continue to go on, the EITC is one of the issues hanging in the balance. Although the program hasn’t been addressed in the tax reform, Pate said there is a chance it could be in the budget.
“I haven’t seen it in writing, but there is a chance it could be on the budget and gets approved in the process,” Pate said.
Junious Smith III can be reached at 252-559-1077 and Junious.Smith@Kinston.com. Follow him on Twitter at @JuniousSmithIII.