WV Center on Budget and Policy > Publications > Tax and Budget > State Tax > A Tax Cut That Works for Working Families: A West Virginia Earned Income Tax Credit

A Tax Cut That Works for Working Families: A West Virginia Earned Income Tax Credit

January 6, 2015 by

Too many working families in West Virginia are paid low wages and have trouble making ends meet, with basic living expenses stretching family budgets beyond their limits. With tax overhaul a main topic in front of the legislature, a bottom-up tax cut like a state Earned Income Tax Credit that would help people who work hard for low pay should be central to the discussion. Read PDF of report.

The federal EITC is a common-sense tax break that helps working families. It is available only to people who work, and helps them keep working despite low wages — which benefits families and local economies. It grows in size with each additional dollar earned, up to a modest income level, to reward and encourage more work. And because it reduces hardship, it has lasting benefits for children in struggling families, putting them on a path to a better future. States can build on the successes of the federal credit by adopting their own version of it, as 26 have already done.

A pro-work, West Virginia EITC modeled after the federal credit would allow low-paid families to keep more of what they earn, reduce the substantial state and local taxes they pay, and give a boost to local businesses. Relative to other kinds of tax cuts, it’s a targeted and modest investment that can make a big difference for thousands of working West Virginia households in every corner of our state.

Key Findings

  • EITCs provide a bottom-up tax cut for working families. The federal EITC benefited 157,000 low and moderate income tax filers in West Virginia in 2014, with an average benefit of $2,214. Working West Virginians across the state, in fields as diverse as health care, retail, and construction, stand to gain from creating a state EITC.
  • State EITCs make upside down state tax systems fairer. While the federal EITC offsets federal income and payroll taxes, low- and moderate-income families in West Virginia pay more of their income and state and local taxes than wealthier families. A state EITC would help those low-income families who are paying more in state and local taxes.
  • State EITCs are popular and have broad support. 26 states have enacted state versions of the EITC, making their tax systems fairer, and building on the federal credit’s success at reducing poverty and encouraging work.
  • A state EITC would boost small businesses, local economies, and West Virginia’s future workforce. Set at 15% of the federal credit, a West Virginia EITC would benefit 141,000 low- and moderate-income households, including 161,000 children, across all 55 counties, pumping millions into West Virginia’s communities and giving customers more disposable income to spend in their community. It would also strengthen the foundation for young people who make up West Virginia’s future workforce, as research shows that children in families who receive the EITC are likelier to excel in school, graduate high school, attend college, and earn more as adults.