Fully Refundable Earned Income Credit

The federal earned income tax credit encourages and supports work by offering low-income workers a refundable credit based on their earnings and the size of their family. Similarly, the Virginia Earned Income Credit (EIC) allows eligible individuals and families to receive a credit equal to 20 percent of their federal credit to help offset their state income tax liability, but the full credit is non-refundable. As a result, the size of the tax break is higher for taxpayers in higher income brackets and only marginally benefits low-income taxpayers. We think that’s bad policy. Virginia’s credit provides a powerful tool for strengthening the Commonwealth’s working families, its communities, and its economy. By both rewarding work and putting dollars back into the pockets of working Virginians, the credit lifts up low-income communities and infuses money back into the state’s economy. We will advocate directly in support of reforming state tax policy to make the EIC fully refundable in order to make Virginia an even more attractive and affordable place to live, work and do business.