TAX CREDIT WOULD HELP VIRGINIA'S WORKING POOR

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, January 4, 1993                   TAG: 9301040238
SECTION: EDITORIAL                    PAGE: A7   EDITION: METRO 
SOURCE: JAMES A. PAYNE  (staff)
DATELINE:                                 LENGTH: Long
TAX CREDIT WOULD HELP VIRGINIA'S WORKING POOR
THE INCOME gap between Virginia's affluent and poor families widened significantly during the 1980s. According to the Washington-based Center on Budget and Policy Priorities, the average income of Virginia families with earnings in the top 20 percent rose almost one-quarter, by about $22,000, while the average income of those in the bottom 20 percent fell by one-sixth, or about $1,800.
Moreover, of the 43 states that reported a growing disparity between the rich and the poor, the greatest growth in inequity took place in Virginia. At the same time, the average number of hours worked per household increased more among lower-income workers than any other group.
Of course, low-income, working Virginians really didn't need a study to tell them they are falling further and further behind in their struggle to make ends meet. They are well aware of the increasing chasm between their wages and the cost of living, evinced by the escalating number of working families seeking emergency food, struggling for medical service, facing homelessness and asking why they are unable to maintain a decent standard of living.
The fact that children constitute the state's largest poverty group is perhaps the most disquieting indicator of the shrinking economic power of the working poor.
Many Virginians, publicly and privately, are distressed by the human tragedy we witness almost daily. Virginia's legislators expressed their concerns by establishing, at the 1992 legislative session, the Commission to Stimulate Personal Initiative to Overcome Poverty, chaired by Lt. Gov. Don Beyer.
At its organizational meeting in June, the commission adopted a lofty goal, "to create a plan to eliminate poverty in Virginia by January 1, 1998 . . . ." Over the summer and fall, public hearings were held at six locations across the state. The commission has just put the finishing touches on its interim report, which includes several recommendations for the upcoming session of the General Assembly.
The most substantial preliminary recommendation calls for a Virginia Earned Income Tax Credit, which would provide a precise and practical way to improve the plight of the state's working poor. More than 50 state and regional organizations - including the Junior League of Virginia, the Virginia Council of Churches, United Way of Virginia, the AFL-CIO and the Virginia Education Association - have endorsed a state EITC as "pro-work, pro-family and pro-business." Maryland, and five other states, have enacted similar tax credits.
The proposed credit would be 20 percent of the base federal EITC and available to all low-income workers with at least one child in their household. Because it is based on the federal EITC, the state tax credit would be easy to calculate and administer. It creates no new bureaucracy. It places no burden on employers, administratively or economically. The tax credit specifically targets children.
As with the federal EITC, the Virginia tax credit would build with the first dollar earned and increase as the family's wages increased. Thus, it would provide an incentive to work and an alternative to traditional welfare payments.
The federal earned-income tax credit was enacted in 1975 as both an employment incentive and a source of tax relief for low-income, working families. Single- and two-parent families receive a tax refund based on their earned income, whichever is greater.
For 1992, for example, the maximum federal EITC was $1,324 for families with one qualifying child and an income between $7,520 and $11,840, and $1,384 for families with two or more children. The rate diminishes for families earning more than $11,840, and no credits were offered for families with an adjusted gross income greater than $22,370.
In addition, families with a child born in 1992 can receive up to $376, and any family that pays at least a portion of the health-insurance premiums for a child can obtain a refund up to $451. A household qualifying for all three federal credits can get up to $2,211.
Income levels are adjusted annually for inflation. Any working family that meets the income requirements and files either a Form 1040 or 1040A with a Schedule EIC attached can receive a refund. Last year, more than 304,000 families participated, adding more than $253 million to Virginia's economy.
If the General Assembly approves the poverty commission's proposal for a state EITC, a family could receive a maximum refund of $275. This sum, coupled with the federal EITC, would increase the buying power of Virginia's working poor significantly. A major portion of the estimated $50 million refunded by the state would go to local businesses, returning much of that sum to the state and the community.
Through the creation of a state EITC, Virginia can take a significant step toward minimizing poverty - and help the thousands of Virginians who work hard every day, yet remain poor in the midst of growing affluence.
\ AUTHOR James A. Payne a Presbyterian minister in Richmond, was appointed by Gov. Wilder to the poverty commission as an at-large member. Virginia Forum

by Bhavesh Jinadra by CNB