Working Families Tax Rebate Administration Would be Straightforward and Efficient

The Working Families Tax Rebate (WFTR) was signed into law in 2008. Once the rebate is fully funded and implemented, it will refund a portion of the state retail sales tax to as many as 370,000 Washington households. But how will it work? One of the great things about the rebate is how straightforward and efficient the administration will be.

It will build on the federal Earned Income Tax Credit (EITC), so that everyone who is eligible for the federal credit will also be eligible for the state rebate. The benefit of building on the EITC is that the IRS does a significant portion of the administration and enforcement. They will annually send a database to DOR which will contain a list of all Washington households who received the EITC and are therefore eligible for the state rebate. The database will also include the amount of EITC received by each family. The state rebate will simply be calculated as a straight percentage of the federal credit.

The Department of Revenue still has a significant role to play, of course. In the summer of 2008, I was part of an advisory group that met with DOR staff to discuss how applications for the rebate could be collected. Their work has been put on hold because of the budget crisis, but the direction they were taking was encouraging. They were developing a web-based application that would allow people to easily apply for the WFTR. It promises to be very user-friendly and accessible. The screenshot below is an example of the kind of thing the DOR was working on before the program was put on hold. It's the first of only four steps the applicant will have to follow. It’s not by any means a final version, but it gives an idea of how the application would work.

The next step for DOR would be to match the state database with the IRS data, which would already be vetted and audited. If the two match, the applicant is eligible and the DOR can process the payment.

There will need to be an outreach effort to ensure that families are aware of the rebate. This effort would build on existing programs. There is already an organized joint campaign by the state government, philanthropy, and community organizations such as the United Way to ensure that eligible people apply for the federal EITC. Those outreach materials could easily notify people about the Working Families Tax Rebate as well. Paid and volunteer tax preparers could process WFTR applications alongside federal tax returns.

While the program would be relatively simple to administer, the benefits would be significant to households and communities across the state.