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December 31, 2013

In Governor’s Budget, a Little Help for Low-Income Virginians

Governor McDonnell quietly helped over 110,000 working Virginians and their families by recommending they continue receiving the state’s Earned Income Credit (EIC) so they can use more of their hard-earned money for necessities.

Virginia’s EIC helps low-income families make up to some degree for the fact that state and local taxes take a greater share of their yearly earnings than they do from the wealthiest households. That puts more money back in the pockets of low-income Virginians to pay for everyday expenses like transportation and childcare. Critical items like these can be very costly, and without the EIC they may be just out of reach for some workers earning low wages. If no one can watch the kids or you can’t afford to fix the car, a parent may not get to work, missing out on a day’s pay or even losing their job.

When the Great Recession hit, the EIC was expanded to help more workers pay the bills and keep their heads above water. Larger families with three or more children received a greater credit because, as any parent knows, more kids means more expenses. Couples also got extra help because EIC rules reduce their combined credit after they get married. These improvements to the EIC have been a lifeline to families. A married couple with three children saw their average annual taxes reduced by $205.

Although the economy has begun to slowly rebound, the need for continued relief for working families in Virginia is clear. High rates of poverty, reduced wages, and high unemployment mean that more families are struggling to make ends meet. Additionally, transportation legislation passed last session increased a host of taxes – like the sales tax – that eat up a greater portion of a low-income family’s monthly income than in higher-income households.

In the state budget he proposed December 16, Governor McDonnell made the right call by recommending that improvements to the EIC be extended through 2014. Legislators on the House Appropriations and Senate Finance Committees ought to do the same when they take up the budget bill in January, so Virginia working families can meet the needs of their children and stay on the job.

–Jeff Connor-Naylor, Program Director

The Commonwealth Institute

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