Sound policy: Earned Income Tax Credit
CHARLESTON, W.Va. -- As part of the "fiscal cliff" compromise Congress approved at the end of 2012, the federal Earned Income Tax Credit was preserved, renewed for another five years in its expanded 2009 form.
That is good news for low-income workers, including about 160,000 in West Virginia who have claimed the credit in the past. You must be working to claim the credit, but you may qualify and receive a refund even if your income is so low that you owe no taxes.
Many of those who qualify for the EITC are minimum-wage parents, and keeping money in their hands is good for children.
Low-income people spend money on things they need. They use it to pay bills, buy groceries, get the car fixed and cover the other necessities of life. Putting more money in their hands is good for local economies.
In 2011, families and individuals who claimed this tax credit brought $329 million to the state, according to Sen. Jay Rockefeller, a longtime champion of the EITC.
Stuart Frazier, a policy analyst for the non-profit West Virginia Center on Budget and Policy, reports that most people qualify for the credit only for a couple years before they move on to better-paying jobs.
But during that time, the credit can put an average of another $2,000 a year into the hands of the state's lowest-income workers. In West Virginia, where 26 percent of children live in poverty, this tax credit is a substantial part of a remedy.
The EITC keeps parents working and keeps some families out of poverty, which can have lifelong effects on health, education and development. Children who grow up in poverty are exposed to more risk factors that can impair both brain and social development. Poverty threatens children through poor nutrition and environmental toxins, parental substance abuse, depression among mothers, violence, abuse and trauma.
Last month, Frazier proposed a state-level West Virginia version of the EITC could build on the success of the federal credit. What if West Virginia created it's own tax credit at 10 percent of the federal one? That would cost the state about $32.9 million in lost revenue, but could come easily from the $909 million in the state's Rainy Day Fund.
Low-wage workers pay a large share of their earnings in state income, local property and sales taxes. A state version of the Earned Income Tax Credit deserves study by Gov. Earl Ray Tomblin and the Legislature. Helping to create stronger, more self-sufficient families will make a more prosperous state in the long run.