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January 29, 2015

Tone Deaf

Virginia’s lawmakers clearly didn’t get the memo that today is National EITC Awareness Day. Around 7:30 this morning they voted down a critical fix for the state’s earned-income credit in a subcommittee meeting in a small conference room in the General Assembly building. This fix would have let Virginia’s hard-working families keep more of what they earned and made the state’s tax system just a little fairer.

See, right now Virginia’s state earned-income credit is not refundable. That means that if a family’s credit exceeds the amount of income taxes owed, the taxpayer can’t get the difference as a refund.

That also means that, while the state’s credit helps families reduce their income taxes, it can’t do anything to offset all of the other taxes that low-income families pay to state and local governments.

And these other taxes make up most of the state and local taxes that low-income families pay.

The poorest fifth of families in Virginia, who earn less than $21,000, spend 9 percent of their income paying state and local taxes, according to a recent report from the Institute for Taxation and Economic Policy, a nonpartisan research group. Almost all of that goes to sales and property taxes.

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In stark contrast, the richest 1 percent of households (those earning $542,000 or more) spent just 5 percent of their income in state and local taxes – with less than half going to sales and property taxes.

This badly needed fix, sponsored by Del. Ken Plum of Fairfax County, would have helped Virginia’s EIC give working families a much better boost this tax season.

–Mitchell Cole, Research Assistant

The Commonwealth Institute

info@thecommonwealthinstitute.org

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