A Primer on the Working Families Tax Rebate
The Working Families Tax Rebate (WFTR) will help more hard-working Washingtonians meet basic needs, while also providing a boost to the local economy.
The WFTR was signed into legislation in 2008, but never funded. If funded, it would gives a portion of the sales tax back to workers with low wages, helping them afford basic necessities for their families.
The WFTR is based on the federal Earned Income Tax Credit (EITC), a highly successful tool for keeping children out of poverty and providing greater economic security for families.
To see how much you and your family could qualify for, take a look at the WFTR calculator below (1).
Key Facts About the WFTR:
- The WFTR is a hand up, not a handout, because if someone doesn't work and pay taxes, they can't receive this help. The rebate can only be claimed by people who earn income through low-wage work. Most recipients claim this type of tax rebate for just one or two years at a time. It is designed to help families get a toehold in the workforce and it also helps families who experience temporary job loss, reduced hours, or reduced pay to stay on their feet.
- Funding the WFTR would put $91 million back into the local economy. (2) The WFTR boosts local economies across the state by helping low-wage workers keep more of their income, which they spend at local businesses to buy groceries, pay for car repairs, or find care for their children.
- The WFTR is a step toward making our tax system more equitable. Washington state taxes families with low and moderate incomes more than any other state in the country -- households earning $20,000 a year or less pay 17 percent of their incomes in state and local taxes, while the richest 1 percent pay just 3 percent of their income in taxes. If expanded, the WFTR would reduce the share of income that many working families with low and moderate incomes pay in taxes.
- The WFTR already exists in state law and is simple to administer. Including Washington state, 25 states already administer a state EITC modeled after the federal version. Because the WFTR piggybacks off of the federal EITC, a significant portion of the administration and enforcement of the WFTR will be done by the federal government. In addition, the cost to administer the WFTR is less than 4 percent of total program costs.
- The WFTR could boost the positive impacts children and their families receive from the federal EITC -- the most successful anti-poverty tool for children and families. At the federal level, the EITC has been shown to improve learning and future opportunities for kids -- especially kids of color -- including better health, more schooling, more hours worked later in life, and higher earnings in adulthood. The WFTR, set at a high enough rate, could supplement these benefits for families in Washington state.
- Families all across the state would benefit from the WFTR. About 1.4 million Washingtonians would benefit, including 624,000 qualifying children. In addition, about one-third of eligible Washingtonians are people of color. (3) To see how many households in your legislative district would qualify for the WFTR, take a look at the map below (4):
(1)Assumes the WFTR is set to 10 percent of the federal EITC. Rounded to nearest dollar. (2) B&PC analysis of 2012 tax data from the Brookings Institute. (3) Brookings Institute analysis using the Brookings MetroTax model. Qualifying children include those under the age of 19 by the close of the tax year, those under the age of 24 that are enrolled in post-secondary education, or those who are permanently disabled. (4) B&PC analysis of 2012 tax data from the Brookings Institute. Share of households eligible is defined as the share of households that file federal tax returns and claim the EITC. Total WFTR dollars assume funding at 10 percent of the federal EITC.