Creating a State Level Earned Income Tax Credit

H.3029 would allow lower income taxpayers to apply a credit to their South Carolina income taxes worth a designated percentage of the federal earned income tax credit (EITC). The credit would be worth 10 percent of the federal credit in 2015 and would rise to 20 percent after 2018. As with the federal credit if the value of the credit exceeds the taxes owed by the taxpayer then the state must pay the taxpayer the value of the excess. To put it in other terms the credit would be a cash handout, another welfare program for low income individuals.  

The Policy Council has examined this proposal and pointed out a study by the SC Board of Economic Advisors found that a 10 percent state-level EITC would provide around 500,000 South Carolinians with a $279 check annually. Even if the value of this credit is doubled, it isn’t going to lift anyone out of poverty – which is supposedly its point. We further pointed out that 50 years after the federal government declared the “war on poverty” (largely by creating new welfare/transfer programs) there has been little drop in poverty.

Instead of passing tax gimmicks and creating new programs, lawmakers ought to look at the deeper problem. They must look to a broken one-size-fits-all education system, high tax rates on low earners, and laws that set up barriers to entry in all too many professions.

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