Schmudget Blog

One Way to Improve Children’s Health: Fund the Working Families Tax Rebate

Posted by Andy Nicholas at Jun 06, 2012 03:40 PM |

State tax credits for lower- and moderate-income workers result in healthier children, according to a new study by the Carsey Institute. Unfortunately, Washington’s version, the Working Families Tax Rebate, hasn’t been funded since it was created in 2008. Until policy makers do so, our state will continue to miss out on the rebate’s many benefits, which also include stronger local economies and reduced poverty.

The federal Earned Income Tax Credit (EITC), which the state tax credits are modeled on, lifts more families out of poverty every year than any other federal initiative. It makes working families with children eligible for tax credits of up to $5,891 each year. The EITC is designed to encourage and reward work in lower-paying fields, providing families with critical resources to help pay bills and purchase necessities like clothing, school supplies, and medicine.

Building on the success of the federal EITC, 24 states have wisely implemented their own versions of the credit. That investment is paying off. Among other benefits, the Carsey study found that states that enacted EITCs between 1990 and 2006 saw significant increases in the number of children covered by private health insurance and reported to be in excellent health by their mothers. Children in these states were also 24 percent more likely to have visited a dentist’s office in the past year compared to those in states without EITCs.

Washington enacted an EITC in 2008. The Working Families Tax Rebate (WFTR), which was based on a proposal from the Budget & Policy Center, would give about 400,000 Washingtonians a state tax rebate of up to $589 per year.

Yet, policymakers have repeatedly failed to fund the WFTR. That’s a penny-wise and pound-foolish decision, since the rebate would reduce poverty and get more people into the workforce and spending money. The rebate would also help address inequalities in Washington’s revenue system, since modest-income households pay a larger share of their earnings in taxes than the wealthy.

For more information on the Working Families Tax Rebate, check out our policy brief and primer on this topic.

Also, check out the Carsey study for more details on how state EITCs help make children healthier.

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