Schmudget Blog

New Research Shows Tax Credits Make a Difference for Communities of Color

Posted by taral at Mar 15, 2013 04:00 PM |

By Elena Hernandez, Narver Fellow -- New research underscores the power of tax credits like the Working Families Tax Rebate (WFTR), to improve the health and economic prospects of children from low-wage working families – and in particular those from communities of color.  The findings offer lawmakers more reasons to begin funding the rebate and make a difference in the lives of more than 400,000 hard-working Washington families. 

House Bill 1890 would close a costly sales tax break for out-of-state shoppers and use the savings to fund the Working Families Tax Rebate, which was created in 2008 but has never been implemented due to lack of funds.  The rebate is based on the federal Earned Income Tax Credit (EITC), a highly successful tool for helping families move into the middle class, and is particularly beneficial to children. 

Previous research demonstrated the potential benefits of the WFTR for children: -- improving school performance, future job prospects, and health.  As the image below illustrates, new studies indicate these benefits may be even more pronounced in communities of color.  

WFTR COC2

They reveal that increases in the EITC significantly improved educational outcomes for minority children and children from disadvantaged backgrounds.  This could help to narrow the gap in economic opportunity between those children and their better-off peers that threatens the economic future of our state.

The EITC has also been linked to improved health in infants.  One recent study found the EITC reduced the likelihood of low birth weights for babies born to African-American women by four times the rate of reduction for white women.

As federal budget cuts known as “sequestration” threaten the health and well-being of pregnant women and infants – especially women of color -- funding the WFTR would help ease these effects.  

Closing a tax loophole that benefits residents of other states to help low-income working families in Washington state is the right approach. For more information about HB 1890, click here.  To learn more about the Working Families Tax Rebate, read our primer.

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