In the season of giving when thoughts turn to what can be done to help friends and neighbors in the community who do not make enough to make ends meet, there are many efforts to help them with a basket of food at the holidays, a food and clothes closet and other well-meaning and important giving programs. With all the heroic efforts of volunteers, faith communities and nonprofits, such programs can be difficult to sustain and can be uneven in their level of support. They also put proud working people in a position of having to accept a hand-out. There is another solution for Virginia that can make a great deal of difference: let working people keep more of the money they earn.
Since 1975 the federal government has offered an Earned Income Tax Credit (EITC). It is one of the largest anti-poverty programs in this country. Qualifying individuals and couples who are working but with limited income as defined in tax regulations may qualify for a tax credit and if they do not use all the credit can get a refund. For specific qualifications including income limits, go to www.irs.gov/EITC. Nationwide, almost 26.7 million persons received more than $65 billion in EITC for the 2014 taxable year. The average EITC was for $2,447. In Virginia, 612,000 persons qualified for an average credit of $2,314.
The federal EITC has been very helpful to working poor Virginians. But the program as currently administered in Virginia goes only part way to helping working people. The federal calculations of EITC are used on the Virginia income tax form and credit is given to the amount of the tax liability. There is no refund of unused credit as with the federal income tax and in many states. I proposed legislation last session and will again in 2016 to make up to ten percent of the credit refundable.
There is a simple justification for such a change: putting more money in the pockets of hard-working families will stimulate the local economy as this money will be spent to pay for basic household and personal needs and services. It will also make the tax structure fairer for working people. According to the Commonwealth Institute, the lowest-earning families in Virginia pay 9 percent of their income in state and local taxes while the highest earners pay 5 percent. The 2013 transportation bill included sales tax increases that disproportionately impacted low-income families since they pay a greater share of their incomes in sales taxes than do the wealthy.
Enactment of a refundable state EITC could give a tax break to 296,000 Virginians of as much as $600 for a working family to use to keep food on the table and gas in the car. I hope the Governor will include a refundable EITC in his budget proposal. Your expression of support to the Governor and to your representatives in the General Assembly could lead to the working people of Virginia contributing to growth in the economy by spending money for which they qualify and for which they have needs.