House Bill 181: Tax Relief for Working Families Act
Letting families keep more of what they earn and correcting our upside-down tax code
HB 181 Summary: Proposes a fully refundable state-level Earned Income Tax Credit (EITC) at a value of 20 percent of the federal credit and uses the same eligibility requirements.
Refundable tax credits are a commonsense anti-poverty tool
- Low-income eligible North Carolinians receive an average of $2,800 annually in federal EITC benefits.[1] Through this proposal, those families would receive an additional $419 annually on average.[2]
- This boost to a family’s budget can improve their ability to afford food, medicine, childcare, car repairs, or a transition to stable housing, positively impacting the life course of recipients and their children who currently live in poverty in our state.
Our state tax code is regressive — a tax credit for working families will help
North Carolinians who earn lower wages pay more as a share of their income in total taxes than the wealthiest. This credit would mitigate the harm of our regressive tax code and ensure these workers keep more of what they earn.
The benefits of a tax credit for working families are far-reaching and long-term
- Low-income children in families that get an income boost through policies like the EITC perform better in school, are more likely to attend college, and earn more as adults.[3]
- The EITC is associated with reductions in toxic stress, improved birth outcomes,[4] and increased consumption of healthier foods.[5]
- Receiving the EITC is associated with a decrease in so-called “deaths of despair” associated with the stress and hopelessness resulting from stagnating wages and economic insecurity.[6]
More about HB 181
The credit is fully refundable, meaning that if a taxpayer owes less in taxes than the value of the EITC (which is consistently the case for low-wage workers), they will receive the difference.
[1] https://www.eitc.irs.gov/eitc-central/statistics-for-tax-returns-with-eitc/statistics-for-tax-returns-with-the-earned-income
[2] https://www.osbm.nc.gov/2025-27-budget-recommendation/download?attachment
[3] https://www.cbpp.org/research/eitc-and-child-tax-credit-promote-work-reduce-poverty-and-support-childrens-development
[4] www.sciencedirect.com/science/article/abs/pii/S0277953617306226?via%3Dihub
[5] https://www.chicagofed.org/publications/working-papers/2013/wp-14
[6] www.nber.org/system/files/working_papers/w25787/w25787.pdf
