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  1. Continuing Our Efforts for Tax Credits and Economic Stability for Families

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    Virginia reached an important policy milestone this year — the General Assembly approved a state refund for a portion of the Earned Income Tax Credit (EITC) available to low-income working families. For the 2023 tax filings, families who qualify for the EITC will receive the refund on their federal taxes. At the state level, Virginia will give an additional refund equal to 15% of the federal refund.

    Tax refunds help families experiencing material hardship or poverty meet many of their basic needs and can be used as needed to pay off debts, pay rent or put food on the table. These refunds are especially impactful during times of inflation and when COVID response policies are starting to come to an end.

    Later this summer or early this fall families will also receive a one-time tax relief payment due to larger than expected revenue surpluses in the state budget. People with taxable income will receive a refund, but those who earn too little to owe taxes will not. And unlike the EITC, family size will not be factored into the payment—only marital status. These one-time refund plans fail to consider the additional expenses of feeding a larger family or child care needs for families with young children.

    What Could Be Next for Families?

    While this year marks an important step to provide more families with tax relief, it is helpful to take a step back and see where other states have built policies to support families. As most other states have wrapped up their legislative activity for the year, we can share how other states have designed tax refund policies that specifically support children and families.

    Recently ten states* have introduced legislation to create state-level child tax credits. Vermont is the most recent state to approve a child tax credit for families with children under five earning less than $125,000 per year. Vermont now joins the nine other states who have a child tax credit already in place for families (CaliforniaColorado, Idaho, Maine, MarylandMassachusettsNew Mexico, New York and Oklahoma).

    These states have provided a model that Virginia should consider. These are states who are governed by both Republicans and Democrats, but they have united behind state refunds to support families. Targeting refunds, in conjunction with the refundable EITC, impacts families’ economic security and lowers their level of hardship. Economic hardship is a main reason that children and parents experience trauma, depression, emotional distress. These negative outcomes mean economic hardship also puts children at risk of entering foster care. Additional state refunds can reduce these negative outcomes. Research on the federal child tax credit found that families used the additional funds to meet basic needs for food, utilities and clothing.

    By targeting tax credits to low-income families, these refunds can also reduce inequity. Black and Brown families make up the lowest income families in Virginia and experience disproportionate economic hardship. Choices to expand the EITC and to target Child Tax Credit can provide more financial resources to the families who have often been left behind.

    In the coming months, we anticipate waves of financial uncertainty for families dealing with higher gas prices, increasing rents, and universal free school meals coming to an end. If lawmakers provide additional savings and stability to communities facing uncertainty, our families would feel better about providing for their families and their children would feel more secure.

    We all want Virginia to be the best place to raise children and provide opportunities for them to grow up, but our tax policy is not in line with that belief. It’s time to join the other states in prioritizing children and families and offer targeted tax relief to families.

    *Connecticut, Hawaii, Illinois, Iowa, Kansas, Michigan, Missouri, Oregon, Vermont and West Virginia

  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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