Coming Soon to North Carolina: Redistribution of Wealth?

March 4, 2019

Anti-reform progressives in the legislature are still trying to play some of their greatest hits from the 2000s, now introducing legislation to reinstate the Earned Income Tax Credit.

Initially added to the North Carolina tax code in 2007, it was meant to serve as a lifeline to low-income families struggling to get out of poverty. While it may have been created with the best of intentions, it failed to help North Carolina out of the recession. The state’s EITC was eventually replaced with a standard deduction, which is now $10,000 for individuals and $20,000 for couples. Practically speaking, the increased standard deduction means the amount of people paying zero dollars in state income tax has expanded rapidly.

The results have been pretty clear, with unemployment reaching nearly 11% not long after the EITC was instituted. Now nearly five years on from historic tax reform and the introduction of the standard deduction, unemployment is at one of its lowest rates ever in our state and median income is up thousands of dollars. All of this while 99% of North Carolinians paid less in taxes, if they paid at all.

The reforms in our state got people back to work, put more money in individuals’ pockets, and stabilized an economy that the big government leadership of the 2000s had left in a complete mess.

Reintroducing the EITC at this point makes no sense from a historic or fiscal perspective. Its track record in North Carolina has not been one of success while the standard deduction has been proven to work. At this point, the EITC would simply serve as a handout to people who don’t pay taxes, funded by those of us who do.