Tax credit pushed for N.C.’s poor

from The Asheville Citizen Times

by Kerra L. Bolton,

Millions of dollars in federal tax credits for the working poor are going unclaimed each year, according to research from two state anti-poverty organizations.

Only 16 percent of Buncombe County taxpayers claimed the federal earned income tax credit in 2001, the latest year for which statistics were available. On average, they received $1,559 per family.

But 2,624 to 4,956 eligible families didn’t access the credit. Had they gotten the money, it would have brought in an extra $2 million to $3 million. That could change next year, as state leaders such as Treasurer Richard Moore and Lt. Gov. Beverly Perdue are renewing calls for a state earned income tax credit.

Moore held a press conference last week urging state lawmakers to pass legislation in the upcoming year that would allow low-income wage earners who qualify for federal tax credits to get a state credit equal to 10 percent of the federal one.

Families aren’t filing because they don’t know about it, and the complexities of the form are daunting, said Lucy Gorham, executive director of Earned Income Tax Credit Carolinas, an anti-poverty organization that compiled the research along with MDC, a Chapel Hill-based group.

“Some people don’t realize how much it could be worth to them, and so they don’t bother to file it,” Gorham said.

Perdue worked with state lawmakers earlier this year to get a state earned income tax credit of 5 percent, but the bill stalled in the General Assembly.

Using the 5 percent figure, a family of four with one wage earner making $15,808 a year would receive a state earned income tax credit of $227.

That, combined with other tax credits and minus payroll taxes, would give the family disposable income of $20,038, just above the poverty line of $20,000, according to Perdue’s office.

The push for a state credit comes after May legislation increased the state’s minimum wage rate from $5.15 to $6.15 an hour. Advocates say that increasing the minimum wage coupled with a state earned income tax credit could lift struggling families out of poverty.

“We need to do all we can to inch toward a living wage for all low-income wage earners,” said Scott Rogers, executive director of Asheville Buncombe Community Christian Ministry. “While Wall Street is thrilled with the consumer price index, food and energy costs are eating up a disproportionate amount of wages. That’s a huge problem.”

But critics of the proposal say implementing a statewide earned income tax credit is replicating an already complicated program.

“At the federal level, IRS estimates show that between one-fifth and one-third of applications are either fraudulent or erroneous,” said Joe Coletti, a fiscal policy analyst for the John Locke Foundation, a conservative think tank based in Raleigh. “You end up spending a lot of money not getting to the people you say you want to help.”