Recent analysis of major components of the governor’s tax package by the Institute on Taxation and Economic Policy (ITEP) shows that families in the bottom 20% of incomes, those making less than $30,000 a year, would see an average tax increase of $44 while the top 1%, those making over $763,000, would see an average tax cut of $9,640. Advocates say the governor’s proposal doubles down on Virginia’s already upside-down tax code, in which families with lower incomes pay a greater share of their income in state and local taxes than those with the highest incomes.

The House and Senate are due to release their budget proposals in one month. Parents and advocates are calling on legislators to pass tax policies that are more targeted to families most in need, including:

1. Further strengthening the state’s refundable Earned Income Tax Credit option. The EITC is a proven and targeted policy that provides economic relief to families in need. When it comes to Virginia’s EITC, qualifying families have two options: claim a state EITC up to 20% of the federal credit, not to exceed any income tax owed (also known as a non-refundable credit) or claim a state EITC at 15% of the federal credit and receive a refund of the amount that exceeds any income tax owed (a refundable credit). The governor’s proposal to increase the non-refundable option would mean that just 4.5% of the cut would go to families in the bottom 20% of incomes, earning below $30,000. By increasing the refundable option from 15% to 20%, a family of four with a $25,000 income could get an extra $330 at tax time, which could go toward groceries, gas in the car, and more and help offset the larger share of other state and local taxes that low-income families pay. By allowing people who file taxes using an Individual Taxpayer Identification Number to claim the state EITC, more families could gain access to meaningful economic support.
2. Creating Virginia’s first Commonwealth Kids Credit, a state-level Child Tax Credit. The temporary expansion of the federal Child Tax Credit under the American Rescue Plan Act (ARPA) dramatically reduced poverty and helped an estimated 1.6 million children in Virginia — 85% of all children in the state. Nationally, child poverty rates doubled after the improvements and other federal aid expired, highlighting the key role that direct economic support plays for families. With over 200,000 Virginia children living in families with incomes below the poverty line, a state-level Child Tax Credit could help to stabilize Virginia families and boost children’s chances in life. A refundable $500 Child Tax Credit per child under 18 in households earning less than $100,000 would benefit more than 1 million children in over 600,000 families.

“We’re here today because much of the tax package that Governor Youngkin included in his proposed budget would hinder our ability to fund important investments in our communities and make the cost of living even more expensive for families with low incomes,” said Ashley Kenneth, President and CEO of The Commonwealth Institute. “By continuing the progress on expanding Virginia’s refundable Earned Income Tax Credit option and creating a Commonwealth Kids Credit, we are laying out a vision for tax policies that prioritize the well-being of working families in Virginia over those who, for far too long, have not paid their fair share.”

“Tax credits to support working families have long been a bipartisan priority, but Virginia has progress to make in its state-level tax policies to support our families and our young people,” said Rachael Deane, Chief Executive Officer of Voices for Virginia’s Children. “[Increased child poverty rates after improvements to the federal Child Tax Credit expired] is an illustration of something we know at Voices: Child poverty is a policy choice. Economic security goes beyond the essentials. When families have economic security, we see kids with improved performance at school, reduced hunger, reduced parental stress. Smart tax policy is a powerful tool for improving the lives of children and Virginia families. We are proud to stand here with our partners and demand a tax system that works for all.”

“As prices soar and corporations across the nation report record profits, it has never been more important that we create a tax system that invests in hardworking Virginia families rather than giveaways to the ultra-rich,” said Rhena Hicks, Executive Director of Freedom Virginia. “Expanding the Earned Income Tax Credit and creating a state Child Tax Credit will do just that. Governor Youngkin has made supporting parents a cornerstone of his administration, so I encourage Governor Youngkin to look out for moms like me and support these bills.”

“The governor mentioned in his State of the Commonwealth speech that he was thinking about ‘the mom in Petersburg struggling to get by,’ it got my attention because that’s me. But from what I see, his tax proposals would not help the families in Petersburg struggling to get by,” said Jameshia Johnson, a parent, Virginia State University student, and resident of Petersburg. “Having a stronger Earned Income Tax Credit and creating a state Child Tax Credit would mean families like mine could get the financial relief we need. Inflation has hit working-class families the most. Millionaires don’t have to worry about keeping the lights on. I’m asking the Governor and lawmakers to get on board with this plan this year and not delay action.”

“It is time to do more for Virginia’s families, specifically in the area of economic opportunity,” said Senator Lashrecse Aird who represents the 13th district covering Petersburg and several other localities southeast of Richmond. “As we weigh tax proposals, we have a real opportunity to finally move forward with a Child Tax Credit. Too many families are enduring a harsh economic reality. We don’t need to explore new solutions, because proven ones already exist. A refundable Child Tax Credit would be a tremendous opportunity to support and provide an income boost to families, particularly Black and Latino families. It bears repeating: Child poverty is a policy decision. I am in a decision-making position and I am going to fight to do something about childhood poverty.”

“As an entrepreneur running a small-scale enterprise, I put in immense effort to ensure that my children have a roof over their heads and the potential for a prosperous future,” said Kevin Starlings, a father of four who credited temporary improvements to the federal Child Tax Credit with being able to stay ahead of his bills. “As a father, I cannot bear the thought of other parents struggling with monthly expenses. That is precisely why I am here today to advocate for families like mine who risk being overlooked. It is high time that all lawmakers join forces and back a more robust Earned Income Tax Credit and establish a state-level Child Tax Credit to demonstrate a commitment to promote a more inclusive and equitable society.”

“Families in my district have made it clear to me, they want me to fight for tax policies that ensure the ultra-wealthy pay their fair share and provide financial relief to families most in need,” said Senator Aaron Rouse, who represents the 22nd district covering part of Virginia Beach. “I’m proud to once again work with Delegate Cia Price to champion efforts to strengthen Virginia’s refundable Earned Income Tax Credit option, which will be far more significant [for families] than the flawed income tax rate reduction plan the governor is trying to propose. I look forward to getting this proposal across the finish line and ensuring we have a fair tax code that lifts up people and families who need it most.”

“When I learned that our current governor wanted to a pass big tax cut for those who are wealthy while raising taxes on working-class families, I said ‘This can’t be right,’” said NaQuetta Mitchell, a parent and Founder of Women of Endurance, which supports low-income families in Petersburg and Hopewell. “Today, my plea is to the thoughtful lawmakers on both sides of the aisle who know what tax policies that families in Petersburg, in Virginia Beach, and all across Virginia actually need.  We need a stronger Earned Income Tax Credit and a state Child Tax Credit. These will provide much-needed cash in the hands of families who need it the most. I am calling on lawmakers this year to take action and prioritize families like mine as they craft tax policies this legislative session.”

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About Voices for Virginia’s Children

Voices for Virginia’s Children envisions a Virginia in which our systems center young people, ensuring their ability to realize their brightest potential is no longer predictable by race, socioeconomic status, or geography. Voices champions public policies and legislation that achieve positive and equitable outcomes for young people. Visit www.vakids.org to learn more.

About The Commonwealth Institute 

The Commonwealth Institute for Fiscal Analysis advances racial and economic justice in Virginia by advocating for public policies that are designed in partnership with people most impacted, and shaped by credible, accessible fiscal and policy research. Visit www.thecommonwealthinstitute.org for more information.

About Freedom Virginia

Freedom Virginia is a nonpartisan 501(c)4 organization committed to building a Commonwealth where all Virginia families have the freedom to thrive. Freedom Virginia advances economic security policies through grassroots activism, voter engagement and legislative advocacy. Our efforts began in 2020 and since then we’ve pushed for a more economically secure Virginia by sharing real stories about Virginians’ lack of access to affordable healthcare, education, energy, and the need for policies that foster more safety for families. Visit our website at freedomva.org to learn more.