In light of some recent misinformation regarding North Carolina’s Earned Income Tax Credit, it’s important that the public be aware of the facts underlying this program.
In this election year, political activists in the media have claimed that Republicans in the General Assembly “raised taxes on the poor” by ending the state’s Earned Income Tax Credit as part of 2013′s Tax Reform package. That sure makes for a good sound bite — but let’s look at the facts.
What is the Earned Income Tax Credit?
The Earned Income Tax Credit (EITC) is a special public assistance program for lower-income folks who are employed. There are many other types of government assistance programs for lower-income people who do not work, but to qualify for the EITC, you must have a job.
Who offers EITC payments?
The EITC comes in two forms: the federal EITC and, in some cases, a state EITC. Roughly half the states offer their own EITC payments on top of payouts from the federal EITC program.
When was the federal EITC program started?
The federal EITC program was first established in 1975 by President Gerald Ford and it has been expanded greatly by every administration since. Although the EITC was intended as a temporary program, in the 1990s, it became a major component of federal efforts to reduce poverty. It is now the country’s largest anti-poverty cash entitlement program.
Has the federal EITC program functioned well?
Because of its work requirement, most people agree that the federal EITC has helped motivate folks to both enter and stay in the workforce and leave welfare behind. The federal EITC program has been championed by leaders of both political parties: President Ronald Reagan called the federal EITC “the best antipoverty, the best pro-family, the best job creation measure to come out of Congress.” By some estimates, more than 6.5 million people have been helped out of poverty due to the federal EITC.
How much does the federal EITC pay out?
For the 2014 tax year, the federal EITC payment to a single person (or couple) filing without qualifying children is $496. The federal EITC payment goes up to $3,305 with one child; $5,460 with two children; and $6,143 with three or more children.
Who qualifies for the federal EITC program?
To qualify for the federal EITC program, a person must be working and their earned income and adjusted gross income must each be less than:
- $46,997 ($52,427 married filing jointly) with three or more qualifying children
- $43,756 ($49,186 married filing jointly) with two qualifying children
- $38,511 ($43,941 married filing jointly) with one qualifying child
- $14,590 ($20,020 married filing jointly) with no qualifying children
Which states offer their own EITC payments?
Until last year, North Carolina was one of 26 states that offered additional payments through a state EITC program.