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January 29, 2024

Federal & State Action Can Offer Support to Virginia’s Families

Virginia’s families deserve policy choices that value and recognize the unique challenges they face. Two proposals can help Virginia families get more of what they need: state lawmakers can establish a Commonwealth Kids Credit and federal lawmakers can pass a proposal to expand the federal child tax credit and provide flexible economic support to families across the commonwealth.

Under the American Rescue Plan Act (ARPA), the federal government increased and improved the federal child tax credit in 2021. This included removing policy design barriers that previously prevented some families with low incomes from being able to access the full value of the child tax credit. This expansion, along with the pandemic stimulus payments, was widely credited with nationally cutting child poverty in half. The flexibility also helped families meet their unique needs. Families that received the expanded federal credit reported using it to pay for basic needs like groceries, utilities, clothing, and school supplies. In 2022, Congress failed to renew the expanded child tax credit, thereby reducing the available credit for an estimated 1.6 million children in Virginia and blocking 360,000 children in Virginia, over half of whom are Black or Latino, from access to some or all of the remaining $2,000 credit.

Create a Commonwealth Kids Credit

Because states saw the benefit of reduced child poverty that the expanded federal credit provided, 14 states now have established state-level child tax credits. Virginia lawmakers are currently considering proposals that would provide direct support to families of Virginia. In the 2024 legislative session, lawmakers can create a Commonwealth Kids Credit — a state-level child tax credit providing $500 per child under the age of 18 in families earning less than $100,000 in adjusted gross income. This proposal, outlined in House Bill 969 and a budget amendment in the Virginia Senate, is estimated to help more than 1 million children in families across the commonwealth.

A group of 3 diverse children lay on the floor of a library looking at a book together. a child tax credit in Virginia would help children and families across the commonwealth

Improve the federal child tax credit

Advocates have continued to pressure Congress to build upon the success of ARPA. Now, there is a federal compromise with some momentum that could improve upon the existing federal child tax credit. While not as comprehensive as the expanded credit under ARPA, this new federal legislation proposes to improve upon the existing credit structure in three key ways that expand access for low-income families.

First, it phases out the limits to how much a family can receive back when the credit exceeds their income tax obligation. It also provides each child with the same size credit rather than a family total, which currently limits the credit for families with low incomes. The proposal also features a “look back” provision that lets families use prior year earnings to calculate credit amount and eligibility. Nearly 300,000 children in Virginia would benefit in the first year of this proposal.

State and federal lawmakers can take action now

Child tax credits are proven tools that are shown to reduce poverty, improve educational outcomes, and give families the flexible economic support they need to take care of their families. This is important now more than ever — 41% of families with children reported last fall that they were experiencing difficulty paying for household expenses.

Virginia’s state lawmakers can take action now by supporting House Bill 969 and Budget Amendment Items 0 #17s and 258 #1s in the Virginia General Assembly. Virginia’s congressional representatives and other federal lawmakers should act now to support the bipartisan Child Tax Credit expansion proposal so families are able to benefit while filing their 2024 returns. Together, these two policies can provide Virginia’s families and children with needed support to help make ends meet.

Economic Opportunity

Megan Davis

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