As West Virginia continues to battle a combination of economic woes — decline of the coal industry, low natural gas prices, low workforce participation and low education rates — that have taken a toll on the state's budget, the West Virginia Center on Budget and Policy is pushing for an Earned Income Tax Credit.
The CPB's report on the EITC says the credit can produce not only more disposable income in the state, but also healthier babies, better educational outcomes and increased earnings.
Seth DiStefano, the state EITC campaign coordinator, said that's because with more money in working families' pockets, they'll seek health care for their children and more education.
DiStefano said the WVCPB is working for 15 percent, which will cost the state $50 million.
With state leaders cutting the general revenue budget to the bone while trying to avoid any tax increases, the amount appears staggering. But DiStefano said he's working on loopholes that would make up for the loss.
First, he said a tax on digital downloads would bring in $10 million and more in the future as the state's internet services get better. The EITC's merits, though, make it easy for politicians on both sides of the aisle to support it.
"It's not a hard sell," DiStefano said. "You can be conservative or you can be liberal and you can really like the Earned Income Tax Credit."
About 33 percent of West Virginians are working for what is considered low wages, or 200 percent of the poverty level, and the amount of tax credit depends on income, marital status and number of children.
"The credit's value grows to a certain threshold, with the largest credit going to parents making about $10,000 to $23,000 a year, who can receive a credit of up to $6,242," the WBCPB report says. "The value of the credit gradually phases out as workers earn more, and is fully phased out at incomes between $39,000 and $53,000, depending on marriage status and number of children."
The report says that 21 percent of all tax filers in West Virginia qualified for the federal EITC, which put $347 million back into the state's economy. The average credit was $2,214, the report said.
Wages in the state have been stagnant for several years; thus, the EITC is, in effect, a raise. The EITC is a "bottom-up" tax cut, and makes the tax system more fair, the WVCBP report says.
For example, a single mother of one, working full-time at $9 per hour, would earn $18,720 a year before taxes, and would owe about $489 in state income taxes, according to the report.
A 15 percent EITC would allow her to keep $474, reducing her tax burden to $15, the report continued.
"The benefits of a West Virginia EITC would be felt across the state," the report said. "Because the families who receive the EITC spend nearly every dollar they earn on necessities, the money that helps them provide for their children will flow right back into the economy and give a boost to local businesses."
DiStefano predicted that the legislature will be forced to raise taxes after the election, and the easiest taxes to raise are those that hurt lower-wage workers the most — the sales tax, the tax on cigarettes and the tax on fuel. Low-wage workers spend a significantly higher percentage of their income on those taxes than workers who make more.
"The ones that are politically feasible are the ones that are regressive," DiStefano said. "We absolutely have to include the EITC to soften the blow."
He said Sen. Ron Miller, D-Greenbrier, has been the EITC's undisputed champion in the legislature thus far, attempting to pass a bill that would raise the tax on tobacco to $1, with the difference dedicated to the EITC. The amendment was defeated.
Miller also educates other senators about the EITC through floor speeches and in committee, DiStefano continued.
"As the legislature considers changes to taxes in West Virginia, a high priority should be an affordable, bottom-up tax cut that keeps people working and gives local businesses a boost," the report concludes. "The experience from the federal credit and the 26 states with their own credit makes it clear that a state EITC in West Virginia can help build the middle class, strengthen communities, and keep West Virginians in the workforce."
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