According to recent reports, the federal government administers 126 separate programs directed at low-income households. Many of these programs are administered in partnership with state governments, while state and local governments provide still more separate programs. Spending on these programs exceeds $1 trillion, and that is not even counting the largest entitlement programs of Medicare and Social Security.
The Welfare State is a massive drag on the economy that not only stifles economic growth and prosperity, but often times traps low-income households in poverty because it incentivizes government dependency over work.
Not content to wreak havoc on the economy and destroy people’s lives through traditional welfare programs, some North Carolina legislators want to re-introduce yet another welfare program through the tax code.
Since 1975, a program called the Earned Income Tax Credit has existed in the federal tax code, and from 2007 through 2013 North Carolina offered its own version. Senate Bill 275, sponsored by Sens. Don Davis (D-Greene) and Jeff Jackson (D-Mecklenburg) would bring this state tax credit back (there also is a House version of this bill: HB 27).
In short, the EITC refunds a portion of earned income to eligible workers. To be eligible, a worker must earn below certain income thresholds that vary according to household size. The amount of the credit is calculated on a sliding scale: starting relatively small at the lowest levels of income, rising as income rises up to a certain point, then the credit falls again as the worker’s income continues to rise.
The credit, however, is refundable, which means that if the size of the tax credit exceeds the actual amount of tax paid, the person still receives the full amount of the credit in the form of a check from the government.
North Carolina’s state version of the EITC was a flat, small percentage of eligible worker’s income – meant to be a minor supplement to the federal tax credit. Some estimates project that bringing back the state EITC would cost $108 million.
The key to lifting people out of poverty is a growing economy that increases opportunities for those at the lowest levels of education and income. Piling on another welfare program on top of the more than 10 dozen that already exist would merely exacerbate the existing destruction imposed by the massive Welfare State. People in poverty need opportunity, not more government dependence, in order to climb up the income ladder.
Because it increases government dependency at the expense of real economic growth and opportunity, Senate Bill 275 is the week’s Bad Bill of the Week.