Refundable Earned Income Tax Credit Proposal Would Provide Direct Support to Virginia Families Who Need it Most

Lawmakers should consider additional tax policies that strengthen Virginia’s budget and communities

Earlier today, Gov. Ralph Northam proposed several tax changes, including a partially refundable Earned Income Tax Credit (EITC), which is one of the most successful policies at helping families make ends meet. The Commonwealth Institute (TCI) has long championed efforts to make Virginia’s state EITC refundable, which allows qualifying families to get the full amount of their credit. The EITC boosts incomes for working families with low and moderate incomes, and a refundable EITC would increase their tax refunds by hundreds of dollars on average. 

Currently, the state’s version of the credit equals 20% of the federal EITC, but a family’s credit is capped at the amount of state income tax owed, also known as “non-refundable.” Northam’s proposal would allow a significant portion of the state credit (up to 15% of the federal credit) to be refunded to families.

“Over the past 18 months, we have seen that policy responses that provide cash directly to families who need it most have been effective in supporting families and our economy,” said Ashley C. Kenneth, TCI’s President and CEO. “A refundable EITC would build upon these successes by providing meaningful and targeted support to many families who are too often left out of state tax debates and it would help to flip Virginia’s upside-down tax code.”

In Virginia, people with lower incomes typically pay a larger share of their incomes toward state and local taxes than those with higher incomes. A refundable EITC would put some of that money back into the pockets of families with lower incomes. 

The Commonwealth Institute will continue to champion a refundable EITC and work toward its passage in the upcoming legislative session.

Several additional tax policies have been proposed by both the outgoing and incoming administrations that would reduce resources for education, transportation, and other priorities. While some of these policy ideas, such as eliminating the grocery tax, may have merit individually, enacting them without ways to backfill those resources over the long term would threaten the overall fiscal stability for the commonwealth and the well-being of our communities. Lawmakers should consider additional tax policies that strengthen Virginia’s budget, such as asking extremely wealthy individuals and large, profitable corporations to pay their fair share.