Tag Archive: tax policy

  1. Putting the “Child” in Front of Tax Credit

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    Few tax policies are conditional on providing for the needs of children or ensuring that refunds are distributed based on the number of children in a home. It’s been a difficult time to be a parent and just this past November, 44% of families in Virginia indicated they had a hard time affording their typical household expenses. It’s heartbreaking to hear from a parent who is stressed about keeping food on the table or a roof over their heads. And it’s detrimental to our society when we can’t provide children economic security, impacting our children’s brains and their growth and development.

    It’s time for Virginia to create a tax credit for parents and guardians who have children under 18 in their homes. This year Senator Jennifer McClellan, Senator Adam Ebbin and Delegate Kathy Tran have filed a Child Tax Credit (HB2205/SB1324) that would be available to all households in Virginia who claim dependents on their taxes and earn under $100,000 per year. The household would be eligible for $500 per child in a refund of their tax dollars.

    Virginia families are battling inflation and continued economic uncertainty. We are reaching the end of COVID relief, yet for many families that “end” does not bring certainty or stability in their economic health or their children’s physical health and well-being.

    But we have a tool that we know works. The expanded Child Tax Credit provided as COVID relief changed the trajectory of childhood poverty. The expanded Child Tax Credit helped to bring childhood poverty to a record low. Virginia’s supplemental poverty measure declined to 9% in 2021. Families receiving the credit used it to help put food on the table and pay their basic utilities.

    More than half of families survey reported using the expanded Child Tax Credit for food, followed by a third who used the money to pay bills.

    A refund of $500 per child can help afford a month of groceries, a thousand diapers or a security deposit on a new apartment.

    As lawmakers weigh tax refund proposals, a Child Tax Credit should rise to the top because it can provide resources to families at a time in children’s lives when they need it most. Researchers have identified how the stresses of living in poverty can impact the hardwire of children’s brains and create future mental health concerns and academic challenges. As lawmakers consider various ways schools and communities can help reverse the impact of the pandemic on children, providing tax relief back to their parents is a clear win. In 2022 several states enacted refundable Child Tax Credits or one-time relief to prioritize families and impact this life course including Vermont and New Mexico. Virginia is in a fortunate position to have strong tax revenues again this year. The commonwealth should create a Child Tax Credit to support strong families.

  2. 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