New data analysis from The Commonwealth Institute shows impact of the EITC in every district under the newly drawn legislative maps

Recently, The Commonwealth Institute for Fiscal Analysis (TCI) released “Earned Income Tax Credit Supports Virginia’s Working Families: Updated District and Locality Data.” The analysis shows that about 600,000 working families in Virginia are helped by the federal Earned Income Tax Credit (EITC). Many of these families would benefit from a proposal to make the state’s version of the credit refundable, according to TCI, an economic and policy research organization in Richmond. The new analysis shows the number of tax filers who receive the credit by locality and legislative district under the new special masters’ maps that were adopted by the Supreme Court of Virginia. 

Like most states, Virginia also has a state EITC that supplements the federal credit, though Virginia’s is limited because it is not refundable and many families miss out on the full value of the credit. The federal and state EITCs support working people with low incomes and help them cover basic necessities like groceries, utility bills, and other basics. In his administration’s outgoing budget, former Gov. Northam proposed making the state EITC partially refundable — meaning that if the earned credit is larger than the income tax owed, a portion of the credit is refunded, just like any other tax refund.

“The EITC is one of the most effective policies for directly boosting family incomes,” says Chris Wodicka, Senior Policy Analyst at the Institute and primary author of the report. “While families with low incomes often pay little in income tax, they are greatly impacted by other state and local taxes, which are a large part of why Virginia’s tax code is upside-down. Making sure families receive a larger portion of the EITC through refundability is a targeted solution to offset these taxes for low-income families. Policymakers can strengthen the state EITC this legislative session.”

During the 2022 General Assembly session, state lawmakers will consider several proposals to make Virginia’s state EITC fully or partially refundable. Working families who would likely be boosted by improving the state’s EITC live throughout the state.

In Northern Virginia, the 29th Senate District has 13,600 EITC filers, while the 34th Senate District has 11,900 EITC filers.

A partially refundable state EITC would help to address Virginia’s upside-down state and local tax system by offsetting state and local taxes paid by working families, including sales, excise, and property taxes.

The full report, “Earned Income Tax Credit Supports Virginia’s Working Families: Updated District and Locality Data,” which uses the most recent IRS data and reflects the court-drawn redistricting maps from December 2021, is available online at www.thecommonwealthinstitute.org, with additional House, Senate, and locality data.

On Monday, House Republicans killed legislation (HB 1312) that would directly benefit low-income families in Virginia through a refundable Earned Income Tax Credit (EITC). Current restrictions limit the effectiveness of the state EITC which negatively impacts low-income families, particularly families of color.