Wealthy people in Virginia may pay more taxes. But a new study finds poor people pay a greater share of their income in state and local taxes.
Virginians who make the least amount of money pay 40 percent more taxes as a percent of their income than the wealthiest Virginians. That’s according to a new report from the Institute on Taxation and Economic Policy, which says Virginia’s tax code is upside down.
Meg Wiehe is deputy director at ITEP. "Virginia has on paper what appears to be a progressive income tax," Wiehe says. "But in reality, it’s not that progressive. And that’s because the top rate in Virginia kicks in at $17,000.”
That means someone making $50,000 a year and someone making a million dollars a year are essentially paying the same top rate.
Michael Cassidy at the Commonwealth Institute says the solution to this is a system that targets tax cuts to people with low incomes. “The value of a family's earned-income tax credit is determined by their level of income, their filing status and their family size," Cassidy says. "And so it’s designed to be well targeted, a credit that boosts working families’ income based on income and size.”
Virginia is one of the few states that does not make its earned income tax credit refundable, meaning working families would have negative tax liability to offset sales taxes and property taxes. Cassidy says changing that one part of the tax code would go a long way toward making the system more fair.
This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.
