Earned Income Tax Credit

The howls started immediately when, last year, to reform the tax code and create jobs the General Assembly dropped the state’s version of the so-called earned income tax credit.


It became, pretty quickly, a media circus.


Rev. William Barber waded in, suggesting he – by virtuously standing up for the E.I.T.C. – was the epitome of rectitude while those who didn’t agree with him had no empathy for the poor.


It was politics run amuck.


So what exactly is the E.I.T.C.?


Well, first it’s not a tax credit at all. Instead, it works like this: Let’s say, hypothetically, a low income person pays $500 in Social Security and other taxes. At the end of the year, they can file for an E.I.T.C. tax credit and receive a ‘refund’ of, say, $2,000. In effect, they receive a ‘refund’ $1,500 greater than the taxes they paid.


And that’s what the General Assembly ended last year: North Carolina’s local version of Washington’s E.I.T.C.


Now, last week, one of the publications that showcased Rev. Barber’s attacks on conservatives – like me – reported the federal E.I.T.C. is a poster program not just for welfare boondoggles but outright fraud. According to the Government Accountability Office, 24% of all E.I.T.C. refunds ($14.5 billion) were ‘overpayments’ that should never have been made.


How, you might ask, could that happen? The Commissioner of the IRS explained the “improper payments” were caused by parents lying about their number of children or their incomes – and the IRS mailing the checks before bothering to check the claims.


To put that into perspective, $14.5 billion would pay for North Carolina’s entire General Fund budget for eight months.


It never made sense to disguise a welfare payment as a tax credit. It was pure political hoo-doo. North Carolina took a step in the right direction when it ended the E.I.T.C. And Washington could save $14.5 bi8llion in waste by doing the same thing.

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