(RALEIGH). – A new report from the Center for Budget and Tax Policy shows the gap is widening between the poorest and richest in North Carolina. In the last decade, the average income of the state's poorest 20 percent dropped almost 4 percent, according to Liz McNichol, a senior fellow.

"It's bad for the economy. It makes it harder for poor families to climb up into the middle class and it makes it harder, actually, for the country to create the workforce that we need in order to compete, “ says McNichol.

The report cites that North Carolina is 17th worst in the nation when it comes to the gap between richest and poorest. A large gap also exists between the rich and the middle class, with incomes of the state's richest more than four times higher than those in the middle class.

Incomes across all spectrums declined during the recession, but the report found that the incomes of the wealthiest have started to recover while those of other consumers have remained stagnant. McNichol says state lawmakers should consider the widening gap as they review and make changes to North Carolina's tax code. Tax reform could be one of the issues discussed by the new General Assembly that meets in Raleigh starting in January.

"The tax code can either make the gaps narrower or widen them, and when you're putting in place tax cuts for people at the upper end of the income scale, you end up making the problem worse."

Tax cuts put in place a decade ago will expire at the end of the year if not extended by Congress. President Obama only wants the tax cuts to be extended for those making less than $250,000 per year, continuing his re-election campaign theme that those who make more should be paying more in taxes.

Congressional Republicans are arguing for closing loopholes and other changes in the tax code. They say that just raising taxes on higher income earners and small businesses will not create the money needed to lower the deficit and reduce the debt. They also claim it could harm the economic recovery.

(With information from North Carolina News Service)