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July 1, 2019

Federal Proposal to Boost Kids and Families Takes Step Forward in Congress

Supporting families means making sure each parent can provide for themselves and their children. That includes putting food on the table, keeping the lights on, having reliable transportation, and affording other basics. By some estimates, over 40% of Virginia households struggle to make ends meet when it comes to covering the necessities. To address these challenges, public policy needs to be part of the solution. At the federal level, Virginia’s congressional delegation has the opportunity to support families across the commonwealth by backing new legislation in the U.S. House of Representatives.

On June 20, The Economic Mobility Act of 2019 cleared the House Ways and Means Committee (Rep. Beyer of Virginia’s 8th Congressional District voted in favor). The Act includes significant improvements to the federal Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). According to research from the Institute on Taxation and Economic Policy, major provisions of the bill would help over 1.4 million adults and over 1 million children in Virginia. The Act would substantially increase incomes for Virginia families with low and moderate incomes – about 68% of the Virginia impact will go to families with incomes below $45,500. Families helped by these proposals with incomes below $45,500 would get an average benefit of over $1,200.

Image with text: On June 20, the Economic Mobility Act cleared the House Ways and Means Committee, one step closer to helping families in Virginia.

The proposal would build off the success of the current credits and extend them to a larger number of families with lower incomes. The EITC and CTC are two of the most effective public policies at making a difference in families’ lives on a range of outcomes including employment, health, and education. Over 600,000 of Virginia’s working families receive the federal EITC, and over 400,000 families receive the refundable portion of the federal Child Tax Credit. These two credits combined to lift nearly 200,000 people, including 100,000 children, out of poverty in Virginia each year from 2011 to 2013.

Right now, the EITC provides a big boost to families with low to moderate incomes and children at home, yet it doesn’t do enough for other workers with low incomes – some of whom are noncustodial parents. Working people with low incomes who don’t have qualifying dependent children at home end up being taxed further into poverty due to the regressive nature of federal payroll taxes as well as state and local taxes. The proposal would extend the credit to more of these workers and increase the maximum EITC amount for these workers by about $900. In addition, the Act would remove the tight age restrictions currently in place that exclude working people younger than 25 or older than 65 from receiving the credit. The proposal would allow qualified workers between the ages of 19 and 66 to receive the credit.

The legislation also includes needed improvements to the CTC that would remove the strict income requirements that prevent many families at lower incomes from receiving the same CTC as other families. Within the roughly 20% of the population with the lowest income, about a quarter of families with children do not receive the CTC, due to current restrictions. This compares to the over 90% of families with children in the middle 60% who receive the credit. The Act would lift these limits and allow families with the lowest incomes to receive the full amount of the CTC.

This proposal would truly support Virginia’s families and would represent a step toward greater equity and justice. For families of color, present-day inequity is the direct result of decades of discrimination, disinvestment, and exclusion from jobs, schools, and neighborhoods. Data from 2015 show that 77% of Black households and 73% of Latinx households in Virginia were in the bottom 60% of income, compared with 54% of white households. We must address the systemic racism that continues to block opportunity for many of Virginia’s families and communities. While that work continues, smart tax policy choices can be used to narrow these inequities.

Under the Act, most of the proposed changes to the EITC and CTC would be scheduled to expire in a couple of years. However, that shouldn’t stop lawmakers from supporting these needed improvements to help families today. To make sure improved credits are available to families over the long term, lawmakers should also support a similar piece of legislation – the Working Families Tax Relief Act. This Senate version already has the support of over 46 senators, including Sens. Warner and Kaine.

The previous Congress passed the 2017 tax law that did little for families with low and moderate incomes. Lawmakers decided to increase the CTC, yet largely excluded millions of children and families with the lowest incomes. Lawmakers decided not to increase the EITC and instead reduced the EITC’s value over time. And corporations got a giant tax cut. The new Congress has the opportunity to take a different approach. Strengthening the EITC and CTC would be a welcome departure from past tax policy decisions that overwhelmingly helped the richest households. We ask that every member of Virginia’s congressional delegation support the Economic Mobility Act and the Working Families Tax Relief Act.

Budget & Revenue

Chris Wodicka

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