Too many of Virginia’s low-income working people struggle to move ahead, or even to stay afloat, as their costs continue to rise faster than their pay, making it harder for them to provide for themselves and their children.
That’s a problem we can’t afford to ignore. To strengthen our communities and our economy, we need to ensure that working people have a chance to move ahead and that their children have a chance to succeed.
Fortunately, recent tax policy proposals offer a promising path forward.
At the state level, Virginia lawmakers considered several proposals to improve the state’s Earned Income Tax Credit (EITC). Virginia’s EITC is primarily a tax credit for working families with children. However, restrictions around Virginia’s state EITC means families are missing out on the full value of the credit. A stronger state EITC that is refundable would give the state’s working families an income boost of about $200 million combined. And most of the working families who receive the EITC were excluded from receiving the $110 and $220 refund checks sent over the last few weeks by the state tax department. Although the state EITC proposal was left out of the final tax agreement passed in 2019, the governor and General Assembly have another opportunity in 2020 to take up this legislation and finally improve our state’s EITC.
Federal lawmakers have also proposed to build on the success of the federal version of the EITC and the federal Child Tax Credit (CTC). The 2017 tax law actually trimmed the value of the federal EITC going forward and left out families with the lowest incomes from the law’s doubling of the CTC. Instead, kids in those families were entirely left out or received only a small $75 increase in the value of their CTC. In contrast, the new proposal, which is known as the Working Families Tax Relief Act, would strengthen both credits, enabling working people to keep more of their hard-earned pay. And, by improving the CTC, the proposal would help millions more kids in families with low and moderate incomes get a stronger start in life.
In Virginia, the proposal would make more than 1 million households more financially secure, benefiting over 1 million children in our state – with the benefits shared broadly across racial groups.
Unlike many previous federal tax proposals, this proposal is squarely focused on boosting working families. The EITC and CTC already help hundreds of thousands of families across Virginia. The EITC benefits over 11,000 families in the New River Valley alone.
Building on the existing credits, the new proposal would give working people a needed boost. For example, a single mother of two earning $20,000 a year would get a $3,670 increase in her income. And a married couple with two young kids making $45,000 a year would get a $3,500 increase.
That means more money to buy basic necessities, make needed home repairs, maintain a car to get to work, or use toward more education or job training.
The proposal would also have lasting benefits for millions of children. Nationally, the proposal would cut child poverty by 28%. Kids whose families receive working family tax credits do better in school, are likelier to attend college, and will likely earn more as adults. That’s important not only for children, but for all of us as we seek to strengthen our country for the future.
It’s time to prioritize working Virginians and their families. We urge Virginia’s congressional delegation to support improvements to the federal EITC and CTC, and we urge the governor and state lawmakers to build upon the effectiveness of the federal EITC and substantially strengthen the state EITC. These efforts would help to give working people and their children a fair shot to get ahead. We hope all lawmakers will join them in sponsoring these proposals.