Tag Archive: tax benefits

  1. How Virginia Families Can Benefit from Proposed Tax Credits

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    Parents have faced numerous challenges due to the COVID-19 pandemic. Child care closures made it more difficult to work. Employment uncertainty and illness made it more difficult to plan ahead. And inflation has impacted day-to-day expenses, where lower income families feel an even greater impact. These material hardships also put an emotional toll on families. Parents have repeatedly reported higher than typical levels of stress and anxiety during the pandemic. Being a parent on a normal day is not an easy job, let alone living through two years of the pandemic.

    In this time of unprecedented tax revenue surplus in Virginia, more than $13 billion over three years, it is time to deliver relief and put money back in the pockets of parents. With multiple tax credit and tax deduction options under consideration, state lawmakers should prioritize ones that benefit low-income families.

    On February 24, 2022, Voices held a press conference, along with Families Forward Virginia and The Commonwealth Institute, to demonstrate how parents could benefit from these tax policy choices and why they need relief. Crystal, a mom living in Franklin, VA asked legislators to act on these tax choices, “I’ve climbed out of the depths of hell to get where I am today…families like mine who are having to decide whether to pay bills or put food on the table.”

    View more of the stories as well as testimony from Delegate Marcia “Cia” Price and Delegate Candi Mundon King here.

    Current Tax Policy Options Considered by the Virginia General Assembly

    1. Partially Refundable EITC

    The partially refundable Earned Income Tax Credit (EITC) would benefit approximately 600,000 tax filers in Virginia. This credit is targeted to the lowest income tax filers, most with incomes below $75,000 a year, and the majority are working families with children.

    This option would send a refund check to families in 2023 for the portion of their tax refund that is less than what they owe in state taxes. Currently, tax filers only receive a refund for the federal portion of their taxes. Families could receive an additional $500 refund in the future depending on their income and family size. Learn if your family might be eligible using this EITC calculator from The Commonwealth Institute.

    This option would cost approximately $200 million per year to provide annual tax refunds to lower income working families. The Senate has accepted this proposal, but the House budget includes a different proposal that doubles the standard deduction and reduces available revenues by approximately $600 million per year.

    1. One Time Taxpayer Relief Payment -> “Parent Tax Relief”

    Another option would come from the one-time surplus of revenue in Virginia—a taxpayer relief payment to all tax filers that would arrive sometime between July and November 2021. The General Assembly has created one-time relief payments with one-time surpluses in the past, most recently in 2019. This proposal was included in Governor Northam’s outgoing budget as a relief payment of $250 for single filers and $500 for joint filers. With higher projected tax revenues, Governor Youngkin has proposed increasing the payments to $300/$600. Both the House and the Senate are planning to provide the one-time relief payments, but the Senate budget does not include a specific dollar amount or plan at this time.

    We think it’s time to revisit this proposal to provide more tax relief to families. The current proposal treats tax filers of all income levels the same and does not assume that families with children have higher expenses. Lawmakers have noted that higher income taxpayers do not need the tax relief as much as lower income families, but have not revamped with proposal. With a total estimated cost of $1.2 billion in one-time revenues, we think there is room to make adjustments in this proposal by including an income cap and adjusting payments based on the number of dependents on a family’s state tax return.

    Adjustments to the one-time relief payment could provide a family $1,200 in relief funding compared to $600 as a married filer or $300 as a single filer. One in four taxpayers in Virginia has children in their household. Adjustments to incorporate family size could cost approximately $600 million out of the $1.2 billion. Including an income cap could ensure that taxpayers without children also receive the one-time payment.

    Including children in this calculation recognizes that families have higher costs to put food on the table and cover housing. It also recognizes that economic stability has a positive effect on children, including the very youngest children, especially on their healthy growth and development. Lawmakers should factor in families when considering the one-time relief options.

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  2. Child Tax Credit Awareness

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    The stagnation and lack of change in the childhood poverty rate calls for policy makers to do something dramatic and innovative about it. We are excited that the American Rescue Plan included enhancement to the Child Tax Credit to specifically to address childhood poverty with the goal in mind that the increase in cash assistance to families may be able to cut childhood poverty in half.

    The enhancements to Child Tax Credit include:

    • Increasing the credit amount to $3,600 for kids under 6 and $3,000 for kids over 6;
    • Making the credit refundable and paid directly to families;
    • Offering the credit as an advance payment to families July-December, or a monthly allowance, that will be deposited directly into families’ linked bank accounts;

    The Center on Budget and Policy Priorities estimates that 86% of children, 1.6 million, will benefit from the enhanced child tax credit in Virginia. And 249,000 kids will be lifted above or closer to the poverty line by the expansion.

    For more info and to access the online tools to update status or file to receive the credit if your family did not have a tax liability, visit ChildTaxCredit.gov.

    Access and download the PDFs below for more information (courtesy of the White House and Annie E. Casey Foundation) by clicking on the thumbnails.

    How policymakers can act to help families experiencing financial hardship and maximize the Child Tax Credit.

    1. During the August Special Session, state lawmakers can dedicate American Rescue Plan resources to improve tax filing outreach and preparation services to ensure non-filers and families with infants receive the credit.
    2. Virginia lawmakers can also provide state level enhancements to the federal tax credits including a refundable Earned Income Tax Credit (EITC) and a state-level child tax credit.
    3. Congress can act to make the Child Tax Credit permanent adopting the proposal included in President Biden’s American Families Plan.

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