Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, February 8, 1993 TAG: 9302080121
SECTION: VIRGINIA PAGE: A1 EDITION: METRO
SOURCE: CAROLYN CLICK STAFF WRITER
DATELINE: RICHMOND LENGTH: Long
STATE COMMISSION BARGAINS FOR TAX BREAK FOR POOR A2 A1 TAX TAX LAWMAKERS LIKE
You would be hard-pressed to find someone at the state Capitol who doesn't think the working poor deserve a tax break.But finding the $50 million for a proposed Virginia Earned-Income Tax Credit?That's another story.
Even the bill's sponsor in the House, Majority Leader Richard Cranwell, D-Vinton, is cautious.
To make the legislation more palatable, he wants to push back its effective date until 1994 and require another vote next year - when lawmakers know for sure how much money is available in the 1994-96 state budget.
The Senate Finance Committee on Thursday agreed with that strategy, to the chagrin of advocates who are wary of mounting yet another battle in 1994.
The tax credit has been considered - and rejected - by the legislature for two years. But this year, Lt. Gov. Don Beyer and the state poverty commission he heads have mounted a full-court press to win support for the tax credit and other measures that are viewed as a hand-up rather than a handout.
"I have yet to hear someone say this is a bad idea," Beyer said. "But that is tempered by the fact that we might not be able to afford it."
Advocates, like Sue Capers of the Virginia Coalition for the Homeless, see the credit as a means of keeping families with children off welfare and out of homeless shelters.
She also is savvy enough to pitch the credit as pro-family, pro-work and - perhaps of greatest significance - pro-business.
Although an individual state earned income tax credit would average $200 to $250 per family, that coupled with a federal tax credit already in place increases a family's buying power enormously.
"It's a wonderful bill," said Capers. For families living at poverty level, she said that $250 can translate to a deposit on an apartment, repairs on a car or payment of utilities or other unexpected bills.
Because of the multiplier effect, state tax experts say the $50 million would generate about $100 million in the economy.
"That would start in the local communities and bring money back to the treasury," Capers said.
More importantly, from Capers' perspective, it would help diminish the cyclical effect of poverty that sends poor families, already teetering on the financial edge, back to homeless shelters.
"It will expedite people out of the shelters," she said.
This is how an earned income tax credit works: A two-parent family of four now is taxed beginning at $8,200 of earned income, well below the federal poverty line of $14,381. With the credit, that tax threshold would rise to $14,800.
A family of four earning $12,000, for example, would already be eligible for a $1,139 federal tax credit. Although the family would have to pay $84 in state income tax, that tax payment would be offset by the Virginia earned-income tax credit of $228. The family's annual earning power would be increased by $1,283.
The credit would be available to parents, including single parents, who live with their children.
Grandparents and foster parents who have a child living with them for 12 months also are eligible.
The $50 million cost would apply only if every eligible family in Virginia took advantage of the credit.
Last year, 304,000 Virginia families took advantage of the federal tax credit, adding a total of $253 million to their tax refunds. The Virginia tax credit would be set at 20 percent of the federal tax credit.
Beyer believes the actual cost would be closer to $18 million annually. In other states that have such credits, about 35 percent of eligible families apply for the credit.
As the economy improves and wages increase, the rolls of those taking advantage of the tax credit would shrink.
Joseph Gartlan, D-Fairfax, is the point man in the Senate on the legislation. He is adamant that the measure be on the table at least by the time the 1994-96 state budget is devised.
A vote in the Senate is expected early this week, although advocates fear the measure may get caught in some high-level political horse-trading before senators cast their yeas or nays.
Late Thursday night, Cranwell allowed his version of the earned income tax credit to die in the House Finance Committee, apparently setting the stage for tradeoffs with the Senate over a proposed investment tax credit for businesses.
Capers says she can't understand how the legislature can support incentives for businesses without taking into account the level of wages those businesses pay their employees.
"The incentive they [the poor] need for a job is a wage that will allow them to live decently," Capers said. "That is the greatest incentive."
Beyer, who also supports such business incentives, is pragmatic about what he will take home from this session. But he is worried that the tax credit for the poor may get swallowed up amid hand-wringing over how much the legislature can spend in a recession year.
Gov. Douglas Wilder hasn't been a whole lot of help. He introduced his own package of welfare reforms that does not mention earned-income tax credits or provide for any money for such a credit in his budget.
He did borrow one poverty commission proposal, albeit without new funding, and touts the benefits of establishing a job investment trust fund that would get people off welfare and into job training.
Individual work accounts would be set up for those in training. Welfare benefits would be "cashed out" into a fund that would pay a stipend to job trainees until they are able to hold a job.
The fund also would provide financial incentives for businesses hiring the newly trained workers.
Beyer, who is making a second run for lieutenant governor this year in hopes of winning the top spot on the Democratic ticket in 1997, says the development of his poverty commission's budget requests only increased his appetite for the state's top job.
"I never wanted so much to be governor as when I was trying to get these budget amendments through," Beyer said.
Meanwhile, Capers and other social program advocates bide their time and hope the legislature will back the earned income tax credit at least by 1994 - and without the requirement for approval again next year.
The tax credit is backed by such groups as the Virginia Education Association, Junior League, United Way, AFL-CIO, the Virginia Council of Churches and the Interfaith Center for Public Policy.
"We had hoped that it would happen now because the need is now and it's pressing and it's high-priority," she said. "But if it can't, at least make it be effective Jan. 1, 1994."
Keywords:
GENERAL ASSEMBLY 1993