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September 6, 2018

Rural Virginia Would Get a Boost from an Improved EITC

Over 100,000 families in rural and small town Virginia currently receive the federal Earned Income Tax Credit (EITC). That’s about one in six taxpayers who claim the EITC in Virginia. In general, these same families are able to claim a state EITC equal to 20 percent of the federal credit. Unfortunately, the state’s tight limits around the value of the credit prevent many families from receiving the full value of their state EITC. Governor Northam’s plan to improve Virginia’s EITC would allow families in our rural areas and small towns to receive their full credit.

Working people across Virginia felt the impacts of the Great Recession, and many of those effects linger today. The state has more jobs and a lower unemployment rate than it did before the recession, but the economic picture looks different for Virginia’s rural communities where employment levels haven’t recovered. These trends reflect a mix of factors, some beyond the state’s control, but state lawmakers have options like the state EITC to provide a serious boost to rural Virginia and its economic prospects.

The EITC makes a real impact in the lives of many working families in rural and small town Virginia. At the national level, federal working families tax credits lifted 1.1 million people in rural communities out of poverty and helped another 2.4 million move up closer to the poverty line in 2013. Working families across the commonwealth are supporting children and paying federal, state, and local taxes. The EITC helps families pay for groceries, transportation, child care, and utility bills. An improved state EITC would likely make an even bigger impact.

State lawmakers took a critical step to support rural areas by expanding health care coverage to hundreds of thousands of Virginians as part of Medicaid expansion. Expanding a pro-work and pro-family tax credit like the EITC represents another significant opportunity. For next year’s tax filing season, the income cut off for the EITC for a married family with three children is just under $55,000. Targeting tax relief to low- and moderate-income working families in rural areas and small towns means stronger families and communities.

The evidence is clear, and the opportunity is in front of state lawmakers. To help address long-standing economic challenges facing many of our communities, a refundable EITC is one of the best investments we can make.

Budget & Revenue

Chris Wodicka

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