West Virginia One Of A Handful Of States That Tax Working Poor
Charleston, WV – West Virginia is one of more than a dozen states who make families at or near the poverty level pay income tax. Phil Oliff, a budget analyst with the Center on Budget and Policy Priorities, says states that do this may be putting themselves at an economic disadvantage.
“In Ohio, West Virginia and Missouri, families with very low incomes are required to pay income taxes,” he says. “Hurts those families themselves, makes it harder for them to work their way up the economic ladder, and it’s bad for the broader economy.”
Oliff says rather than cutting taxes on businesses and higher income individuals to spark economic growth, the state would better off cutting taxes on the working poor as lower income families tend to spend everything they make. As of 2009, over 21% of the population in Pocahontas County was below the poverty line, according to 2010 census figures. The Census bureau’s poverty line for 2010 is defined as an income of $17,374.00 for a family of three and $22,314.00 for a family of four.
Kelli Hinkle, with the West Virginia Alliance for Sustainable Families, suggests the state create an earned income tax credit for people in low paying jobs. She says such a credit could be structured in such a way as to only benefit the working poor.
“It does target working families and individuals,” says Hinkle. “A state earned income tax credit would mirror the federal rules, stipulating that you do have to have earned income, and the cutoff is generally under fifty thousand.”
The report from the Center on Budget and Policy Priorities says the income tax information is important for three reasons. First because income tax is major component of most state tax systems, the design of the state’s system affects the overall fairness of that tax burden.
Second, the income tax plays a huge role in determining the overall impact of a state’s tax system on poor families. Sales tax collected by merchants doesn’t recognize income levels, and property taxes may be passed on through higher rents. So income tax relief can provide some of the most significant low income relief at the state level.
Third, for families trying to rise out of poverty, they often face what is essentially an effective tax on every additional dollar earned due to loss of other benefits such as food stamps, Medicaid or housing assistance. The report says that income taxes on poor families can only make climbing out of poverty that much harder.
Thanks to the West Virginia News Service for information in this story. The CBPP report can be found at www.cpbb.org/cms/index.cfm?fa=view&id=3620.