The Washington Legislature passed a tax credit in 2008 for struggling families at the height of the Great Recession. One pandemic later, state lawmakers are setting out to expand and enact it.
The Working Families Tax Exemption (WFTE) was a state-level model of the federal Earned Income Tax Credit (EITC), which cuts tax burdens on moderate to low-income families based on annual income and their number of children. In 2020, the EITC was open to individuals making $15,820 per year and joint filers taking home $21,710 per year qualified.
The WFTE was written as a sales and use tax remittance program available to anyone living in Washington for 180 days who paid sales and use taxes. The remittance is 10% of their federal EITC tax rebate or $50. To this day, the WFTE was never funded or enacted in the state's operating budget as required by law.
This legislative session, state lawmakers are looking make the tax credit a reality with two bills, House Bill 1297 and Senate Bill 5387. Both bills would open up WFTE remittance payments to all EITC recipients who paid state sales and use taxes after 2022. Both bills would be paid for with money from the state's Tax Fairness Account which could see funding increases from the capital gains tax state lawmakers are considering this session.
State Rep. My-Linh Thai, D-Bellevue, said in February she introduced HB 1297 to lend a helping hand to Washington's hardest hit families.
“This legislation focuses on those who work harder than us, who work two, three jobs, yet do not make enough to support their family,” Thai said. “Without working people, there's no economy, because working people also consumers.”
WFTE advocates say bottom up tax credits are more important than ever as 215,000 Washingtonians look for work in a pandemic that's picking up steam. In 2018, the state Office of Financial Management estimated that around 10.3% of Washingtonians earned the federal poverty rate of $12,140 per year or less.
The two bills include five payout totals. The Senate bill would issue remittance payments starting at $300 for qualifying taxpayers with no children and as much as $1,250 for people with three or more children. The House bill sets those payments starting at $500 for individuals and up to $950 for families of four, respectively. Payouts would be adjusted for inflation by 2024.
Several amendments would ensure the WFTE applies to as many taxpayers as possible independent of the state operating budget. One amendment from state Sen. Rebecca Saldaña would apply remittance payments to taxpayers with valid identification numbers and no Social Security numbers like the undocumented. Another from state Sen. Joe Nguyen, SB 5387's primary sponsor in the Senate, would put the WFTE up for review once a decade starting in 2028.
Others testifying this session say WFTE is as much as social justice for survivors of domestic violence as families looking to keep their lights on.
“Access to cash gives survivors more choices,” Amber Barcel, a lobbyist with the Washington State Coalition Against Domestic Violence, testified to the House Human Services Committee in March. “An extra 500 to $950 can pay for travel to a safer location, it could cover the cost of medical and mental health care needed because of the abuse they suffered.”
Both HB 1297 and SB 5387 have garnered support from state lawmakers across the aisle who seem to agree everyone can use a tax break. State Rep. Drew Stokesbary, R-Auburn, said it makes sense for the state to start with working families.
“I believe that everybody pays too much in taxes,” Stokesbary told his peers on the House Finance Committee in January. “As a Republican who believes in free market and personal responsibility, I think giving people money in their pockets as a form of assistance is the best safety net that there can be. Who knows better about the needs of people in their families than those people and their families themselves?”
Those families include Patricia Moreno, a jobless Washington mother who spent months shuttered at home in the pandemic with no way to pay for a laptop to help her son in his online classes.
“We have been at home without work and without a salary,” Moreno said through a translator testifying to the House Finance Committee in February. “A lot of us are unable to pay our rent to give our kids a roof over their heads. That's why my family and I are asking for a tax credit.”
Funding either bills has proven difficult in past sessions, but with deficit fears easing around Olympia, state lawmakers are confident there's more money to go around in state coffers.
HB 1297 and SB 5387 both passed their respective chambers with overwhelming support over the weekend. The state legislature will now vote on merging them into one bill before it can be delivered to Gov. Jay Inslee.
The two bills would enact the WFTE expansion 90 days after state lawmakers adjourn on April 25.
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