North Carolina governor raises taxes so wealthy can pay $10,000 less

read more http://thinkprogress.org/economy/2014/01/14/3161521/north-carolinas-eitc-tax-hike-poor/

The 900,000 poorest working families in North Carolina just got another tax hike from the conservatives who swept state legislature elections in 2010.

The change took effect at the beginning of 2014, meaning that the taxes those families file this spring will be the last to feature the state's tax break for the working poor. The provision, known as the Earned Income Tax Credit or EITC, will also be 10 percent less generous in its final year. State-level EITCs work by tacking on an additional benefit to the federal EITC, and the law repealing North Carolina's EITC for 2014 also cut the credit from 5 percent to 4.5 percent of the federal benefit.

In order to qualify for the federal or state-level tax credit, tax filers must earn less than about $50,000. The goal of the credit is to buoy the incomes of working people whose employers pay them too little to provide the economic stability that having a job is supposed to ensure. Many conservatives who oppose other policies to boost poor peoples' income, such as minimum wage hikes, support the EITC as an alternative way of keeping working people out of poverty without interfering with how private businesses operate.

But that argument didn't carry the day among North Carolina Republicans, and lawmakers slashed and then eliminated the state's EITC during last year's legislative session. That change was overshadowed by the GOP's broader changes to the basic shape of the income tax code in the state to favor the rich and harm the rest.

Along with the disappearance of the EITC, low-income North Carolinians will be paying higher taxes in order to pay for a tax cut for the richest people in the state. Republicans moved from a two-tiered, progressive income tax system to a flat tax rate of 5.8 percent. A person who earns a million dollars per year will get a roughly $10,000 tax cut thanks to that move, but the bottom 80 percent of the income distribution will see their taxes rise. That means that four out of five taxpayers in the state were going to pay more next year even before the EITC repeal.

The combined effects of those tax changes give poor North Carolinians some incentive to move out of the state, a population shift Gov. Pat McCrory (R) hopes to encourage. There are 25 states that still offer some form of an EITC, including McCrory's northern neighbor of Virginia, and the District of Columbia still maintains the credit as well.