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May 9, 2019

Improved Working Families Tax Credits Would Give a Boost to Mothers and Children

This Mother’s Day, let’s remember that well-designed tax policy has a role to play in supporting moms and their
families. For too many mothers, working at low wages means struggling to get by and to get ahead. Improving working families tax credits would provide economic support and increase opportunity for moms and their children. A recent federal proposal, The Working Families Tax Relief Act, would help more working people with low-wage jobs – including mothers – as they support themselves and their families. Through improving the federal Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), the Act would give an economic boost to about 558,000 mothers and over 1.1 million children in Virginia. This legislation currently has the backing of 46 U.S. Senators, including Senators Warner and Kaine.

When it comes to supporting working families and their children, the existing federal EITC and CTC are already two of the most effective policies on the books. Over 600,000 of Virginia’s working families receive the federal EITC, and over 400,000 families receive the portion of the CTC provided to families with low incomes. And these credits reach many women in Virginia. Over 400,000 Virginia women with paid employment currently receive the federal EITC, and 64 percent of households who receive the federal EITC include a woman who is working. Because the current EITC has strict limits for workers without qualifying dependent children, most women who receive the EITC are mothers with children. And although we know that every mother works, whether or not she has paid employment, the assistance provided by the EITC for mothers with paid jobs is particularly critical, since it helps to offset some of the costs of employment such as transportation.

Infographic: EITC is a boost to women and their families -- 410,000 women with paid employment in Virginia earn the EITC; 64% of households who receive the federal EITC include a woman who works.

The Act would build upon the existing credits and help them go even further. For example, the Act would make the full amount of the CTC available to more families and also provide an additional CTC amount for families with children under six years old to deliver more support to families raising very young children.

So what could these changes mean for a family? Under the Act, a single mom with two kids and an income of $20,000 would get a $3,700 boost. And a married couple with two young kids (under the age of six) and family income of $45,000 would get a $3,500 boost. The improved credits would make a meaningful difference for hundreds of thousands of Virginia’s families.

In addition to improving the federal EITC, improving Virginia’s state EITC is another way to support mothers and kids. In general, families in Virginia who qualify for the federal EITC also can claim a state EITC, and many do. However, Virginia unnecessarily restricts its state EITC, which prevents many families from receiving the full value that they’ve earned. This shortcoming leaves many mothers and families economically unsteady. Proposals to strengthen Virginia’s state EITC would go hand-in-hand with federal approaches for boosting working families tax credits.

The research is clear that working families tax credits help families afford the necessities in the near term. And these credits can be a critical tool to boost women’s long-term economic prospects, too. Earnings grew faster for women who were eligible for previous EITC expansions relative to similarly situated women who were not. In addition, the increased time spent in the labor force results in greater Social Security benefits for women, which reduces poverty among women later in life.

Present-day income inequality and lack of economic mobility for many families represent cumulative effects of past and ongoing racial discrimination, exclusion, and violence – much of which was explicit policy. Given what we know about the barriers that block economic opportunity and mobility
for many Black, Hispanic, and American Indian adults
, improving these credits can be part of a policy response to address long-standing inequality.

Researchers also have documented the EITC’s positive health impacts for mothers and infants. These benefits for mothers include reduced smoking rates, improvements in self-reported measures of mental and overall health, and improvements in certain risk measures related to inflammation and blood pressure.

To support mothers, we need policies that address the real economic challenges faced by today’s families. For families who are struggling to make ends meet, working families tax credits have been shown to help cover the cost of groceries and other basics. Passing The Working Families Tax Relief Act and improving Virginia’s Earned Income Tax Credit are key ways federal and state policymakers can celebrate and support the hard work that mothers do 365 days a year.

Budget & Revenue

Chris Wodicka

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