Key pillars of a strong and fair economy are crumbling in NC
Published September 11, 2014
by Alexandra Forter Sirota, NC Budget and Tax Center, September 11, 2014.
A strong state Earned Income Tax Credit and a robust minimum wage are twin pillars that together form the foundation of a stronger economy — even for those with low-income jobs. Unfortunately, North Carolina state leaders recently demolished one of those pillars and are letting the other one slowly disintegrate.
In North Carolina’s current economy, where the vast majority of job growth is occurring in industries that pay wages below what it takes to make ends meet, the challenge of low-wage work is a reality for more and more families and individuals.
But the economic strain caused by low earnings and the challenge of keeping the lights on, filling a gas tank or making rent ripples beyond those who are directly affected. Low-wage work threatens the economic well-being of everyone in the state by undermining many workers’ ability to support local businesses, build assets and achieve economic security. That is why strong pillars of support for working families like a state Earned Income Tax Credit (EITC) and a meaningful minimum wage are essential components of any effort to build a strong and competitive economy for all.
Before lawmakers allowed it to expire last year, North Carolina’s EITC helped make up for the fact that low-income households pay a greater share of their income in state and local taxes than do the wealthiest households in our state. Only those working for low-wages qualified for the credit and more than 900,000 North Carolina taxpayers claimed it in 2013, its last year on the books, to help support their families’ basic needs.
A minimum wage, on the other hand, provides a wage floor for all workers in the state – a basic guarantee that hard work shouldn’t result in hardship. North Carolina’s minimum wage of $7.25 per hour is tied to the federal minimum which hasn’t been raised since 2009, allowing inflation to chip away at its value.
It will take raising the minimum wage and restoring the Earned Income Tax Credit to reduce poverty and open the way to the middle class for more North Carolinians. In turn, both would put our state on a better path toward economic prosperity and opportunity for all.
The EITC and minimum wage complement each other, with one reaching workers that the other cannot and each delivering benefits to workers at different times of the year. For example, the minimum wage helps the lowest-earning workers regardless of whether they have children, while the EITC gives help mostly to families with children and reaches those who may be earning above poverty-level wages but still struggling, like bus drivers, sanitation workers and teachers.
And while minimum wage increases are reflected in larger paychecks for low-income workers (thus helping them pay monthly bills) the EITC is provided annually at tax filing time. This often provides families with small but significant tax refunds — enough to pay off a debt or make bigger purchases that have been delayed throughout the year, such as car repairs or buying washers or dryers.
A boost in the minimum wage increases the size of the tax credit for families with very low earnings. In North Carolina, reinstating a state Earned Income Tax Credit alongside an increase in the minimum wage to $10.10 would provide an additional boost to working families that is roughly equivalent, at the upper-end, to one-month’s rent. If North Carolina were to set the EITC at 30 percent of the federal EITC (as has been done in some other states), working families would have an extra $1,437 in their pockets – enough for one month of child care for two children or almost four months of food.
Raising the minimum wage and restoring the Earned Income Tax Credit is also an example of the best kind of public-private partnership to improve the economic security of working families. Both private employers and government have a role to play in ensuring that working families can make ends meet. Through these two policies, both sectors share in the costs of achieving that goal. In turn, both reap the benefits in the form of a steadier workforce, lower absenteeism, higher tax revenues and ultimately a more secure middle class.
It is time for North Carolina’s policymakers to recognize that to build an economy that is strong, capable of innovation and competitive globally requires supporting the workers in our state who are struggling to get by. A gradual increase in the minimum wage and restoration of the state’s Earned Income Tax Credit are two building blocks that are fundamental to making work pay.
September 11, 2014 at 9:52 am
Richard Bunce says:
"A strong state Earned Income Tax Credit and a robust minimum wage are twin pillars that together form the foundation of a stronger economy."
Ahhh, no.
September 11, 2014 at 9:56 am
Richard Bunce says:
"Both private employers and government have a role to play in ensuring that working families can make ends meet."
Ahhh, no.
Business does not exist to employ people. Nobody owes anyone a job at any compensation level. Government needs to stop forcing businesses to do it's dirty work. If you want guaranteed income then work to get candidates that support your view elected and raise taxes to support a government guaranteed payment.
September 11, 2014 at 8:14 pm
Norm Kelly says:
I believe recent stats are showing that it's not JUST NC where low-wage jobs are becoming the norm. This has been a fact for a few years now. This seems to have happened about the same time that Obamacancer was introduced to the nation. The law that says anything more than 30 hours is full time. The law that says full time employees MUST be provided health insurance, or the employer will see severe fines. The law that forces medical device manufacturers to pay taxes on INCOME not PROFIT. The only industry in the nation where this is the case. The occupier's schemes are having a negative impact on ALL business, across the country not just here in NC. Remember when the administration attempted to bully Boeing because of expanding their manufacturing into SC? How does this POSITIVELY impact business? What part of increasing taxes AND regulations will encourage ANY business to hire full time and high salaried employees?
The EITC is the government telling people they don't earn enough money and the government (taxpayers!) will make up the difference. This only encourages employers to underpay their employees, cuz they KNOW that the government will make up the difference for them. It also penalizes people who DO make a decent income. Our taxes are higher in order to pay people who don't 'make enough'. This is the opposite side of the lib coin that says the more you earn, the higher your tax rate should be. Same coin, opposite side. Neither is the responsibility of the government. It is NOT the governments business how much money I make. It is the governments business to tax EVERYONE. When I make more, I automatically pay more, even when the RATE is the same. Which is how it is SUPPOSED to be. Too often people who work low-paying jobs do so because they don't have the skills to do otherwise. Or they lack the motivation to do otherwise. So they often LET government pay them for their own failures. How many government give-away programs should taxpayers be supporting? Free cell phone. Free/reduced lunches. Free/reduced rent. Free/reduced transportation. Free/reduced medical care. Free/reduced food. When does it stop? When are the taxpayers giving enough? At what point will 'too much' be reached?
'It will take raising the minimum wage and restoring the Earned Income Tax Credit to reduce poverty'. OK. Show us the facts. The great society started under Johnson's administration. How is the battle against poverty going so far? Are there more people on government subsistence payments now or fewer? How many families have had more than 1 generation on government subsistence programs? How many trillions have been taken from 'the wealthy' and given to 'the poor' since the beginning, and how has this moved people out of poverty? If raising the minimum wage causes job losses as well as higher prices, how does this help the poor or ANYONE else? When the government forces a business to pay it's employees more, even those employees who don't deserve it, the business owner has only 2 choices. First, they can keep only the productive employees, thereby reducing the number of employees on staff - this is called unemployment! The second choice a business owner has when the government forces them to pay employees more is to raise prices. This tends to reduce consumption. Which negatively impacts the businesses bottom line. Which makes it more difficult to keep employees working. So, exactly HOW does raising the minimum wage actually HELP anyone? It's possible, and has been done, for us right-wingers to show statistical proof of our side of the argument. Other than 'feeling good' can your side show any stats to back up your argument? Or is your argument only based on feelings, like almost every other lib scheme!
I have no idea of the political leaning of the organization responsible for this post. However, it's easy to figure out they are lefties just by what they write. For instance ' poverty-level wages but still struggling, like ... and teachers'. See. Easy. How many teachers do you know that are earning poverty-level wages? Certainly NOT in Wake County! This is another myth that is being perpetrated upon us by the libs. Based on no facts, but it 'feels good' to say it.
'competitive globally'. Raising the minimum wage does the exact opposite of creating global competitiveness. Take, for example, Burger King. Assisted by the guy who insisted that the occupier was right to say his secretary shouldn't pay more in income taxes than he did, BK is moving their corporate hq to Canada to REDUCE it's tax bite. So, exactly how does penalizing businesses here in our country help us to be more globally competitive? If our businesses MOVE out of the country to be more competitive, it DOES NOT help anyone in our nation. Take Ireland as a perfect example of how to ACTUALLY create global competitiveness. They actually REDUCED their business taxes to ENCOURAGE businesses to do business there. Here, libs and the occupier want to PENALIZE our businesses EVEN MORE! Which, again, is the OPPOSITE of what it takes to encourage business and be globally competitive. Raising the cost of doing business does NOT make a business more competitive.
How can we tell the organization responsible for this editorial/post is a lib organization? Simple. Every one of their points is 180 degrees off. They didn't just miss the mark. They weren't even in the same state as the target. Hard to hit the target when you are this far from it!
The best thing that any government can do is to learn everything possible about the schemes desired/proposed by libs and their supporters. Whatever schemes libs propose, the government should do EXACTLY the opposite and success if virtually guaranteed! Pay attention to the next Demon convention. Whatever is put forth from the podium, the Republicans can say exactly the opposite. The demon schemes will be confused and wrong. Which would automatically make the Republican platform RIGHT as well as common sense, with very little confusion possible.
