Northam wants earned-income tax credit to be refundable; GOP says it’ll hurt middle class

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RICHMOND, Va. (WRIC) — Va. Gov. Ralph Northam is proposing a tax code change to put more money in the pockets of low-income families, but Republican leadership says it could come at the expense of middle-class taxpayers.

For the first time as Governor, Ralph Northam addressed the House Appropriations, House Finance and Senate Finance Committees on the status of the Commonwealth’s financial health at the end of the budget year. 

“We have a unique opportunity to make the critical investments to benefit all of Virginia,” Gov. Northam said. “I also want to make sure all Virginians are treated fairly by the new federal tax policy.”

Northam says the new federal tax plan causes an “imbalance” with the “majority of those benefits are going to the top income earning individuals.” One of the budget amendments he plans to propose for the 2019 session includes making the earned-income tax credit refundable (EITC).

You have to be working, run or own a business to qualify for this credit. If a family currently qualifies for a thousand dollars earned-income tax credit, but only owes $800 in taxes, the Commonwealth keeps the additional $200. If the credit was made refundable, the Commonwealth would give $200 back to the individual who qualifies for the credit.

“It will put real money into people’s pockets and it will reduce the impact of others, state and local, that hit lower-income family budgets the hardest,” Gov. Northam said. “We are investing in our working families that earn less than $50,000 a year.”

According to the Governor’s office, nearly 30 states have the earned-income tax credit, more than 20 of those states make it refundable. The governor says 600,000 Virginians would be eligible, costing about $250 million that “takes exactly zero dollars from services.”

Republican leaders aren’t supporting this plan, saying that it places a “burden” on the middle class.

“Whether it be college affordability, whether it be their tax burden – I mean they’re the ones that are struggling more than anyone,” House Speaker Kirk Cox (R – 66th District) said. “You’re paying for that refundable earned-income tax credit with middle-class tax money.”

Speaker Cox says he would like to see a broader tax relief plan. One idea is to let taxpayers get back their itemized deductions, like mortgage interest, which they currently can’t file for if they take standard federal and state deductions under the new federal tax code. 

Cox says about 640,000 taxpayers would take up itemized deductions if offered.

“The earned-income tax credit already gives you zero tax liability. You need to take care of the people paying the taxes,” Speaker Cox said.

Other leaders in the Republican party are interested in looking into Cox’s plan.

“As a result in the change in the Federal law I think looking at the itemization is something that’s work taking a look at because it would be more broad-based, it would not be just directed towards the lower income people,” said Senate Majority Leader Tommy Norment (R – District 3). “I’m not saying they don’t deserve assistance but it would be more of a larger spectrum that would affect both middle-income people.”

The Governor plans to propose this earned-income tax credit change and other budget amendments in December for the 2019 session.

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