PRESS RELEASE

Senator Eddie Goodall

35th Senatorial District

Phone Number: (919) 733-7659                     North Carolina Senate

Room 1414, Legislative Building                      Raleigh, NC  27608-2808

FOR IMMEDIATE RELEASE                                                                      January 31, 2007

 

GOODALL CITES FLAWS IN EARNED INCOME TAX CREDIT

 

Democrat legislators today unveiled a plan highlighting bills entitled “Rewarding Work Tax Credit,” which is touted as tax relief for working families.  Both the Senate and House companion bills would allow 5% of the Federal Earned Income Tax Credit (EITC) for North Carolina workers, effectively creating a North Carolina version of the Federal EITC.  

 

The Federal EITC was established in 1975 as an incentive for people to work by adding a tax break for people with lower incomes.  The credit would phase out as their income increased.  The credit later became refundable and has escalated to a federal maximum of $4,400.  Federal credits claimed for N.C. workers totaled $1.3 billion in 2003.

 

With the proposed North Carolina EITC, five percent of the federal total would distribute around $65 million in state credits to North Carolinians, paid from North Carolina’s General Fund Budget and funded by taxpayers not receiving the credit.

 

Senator Eddie Goodall (R-District 35) made the following comments regarding the bill:

 

“The suggested EITC bill sounds nice, but has a serious flaw. Of the $65 million, only $6.5 million would be tax relief, while the other $58.5 million would be a cash subsidy or a welfare transfer due to a problem in the bill.

 

“Because this allows any excess over and above an individual’s North Carolina income tax to be refundable, it means even after a taxpayer pays no North Carolina income tax, they would get a bonus paid for by everyone else.  Instead, we should take the $58,500,000 windfall and provide a true tax break to hundreds of thousands who, under the Democrats’ version, would see no tax relief at all.

 

“The refundable credit would cost the state $800,000 to $1.3 million annually just to manage. Spending a million dollars for another government subsidy that only supplies workers tax relief of $6.5 million is not smart.”

 

Goodall is offering plans to the bill’s sponsors to correct the refundable flaw in their proposal and to create a new “N.C.’s Future” child tax credit of $100 for every child in a lower income household.  The Federal government already has a similar credit of $1,000 per child but North Carolina has no such tax break for families with children.

 

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