Schmudget Blog

Working Families Tax Rebate Remains Smart Policy to Fix Our Tax Code, Bolster Washingtonians with Low Wages

Posted by Julie Watts at Mar 02, 2017 09:05 PM |

By Asha Bellduboset, Narver fellow, and Jennifer Tran, senior policy analyst
 
In Washington state, the Working Families Tax Rebate (WFTR) is a powerful tool to help rebalance the state’s tax code and strengthen the economic security of working families. WFTR is the state version of the Earned Income Tax Credit (EITC), a federal tax rebate that lifts more families above the poverty line than almost any other government program. Through the EITC, qualifying low-wage workers can get an annual boost to their income in the form of a tax credit. Nearly all recipients are families with at least one child living at home. The WFTR was enacted by state policymakers in 2008 to build on the EITC and help hardworking Washingtonians meet basic needs. Unfortunately, the program has never been funded. It’s time for that to change.

Funding the WFTR is an important step lawmakers can take to clean up our inequitable tax code while reducing taxes for households with middle and low incomes. Under our current tax code, people with the lowest incomes pay seven times more in state and local taxes as a percentage of their income than the wealthiest 1 percent. The WFTR would help alleviate the disproportionate tax responsibility placed on people with low incomes by providing an extra boost to households already receiving the EITC.

Households that receive an EITC would get an additional 10 percent rebate for the year through the WFTR. For example, a family with two qualifying children receiving the maximum annual EITC credit amount of $5,616 could also qualify for an extra $562 through the WFTR. This extra income could cover the cost of feeding a family of three for one month or pay for a month of care for a school-age child.

Looking at the most current data on EITC filers, we estimate that if the WFTR were funded [1]:

  • Nearly 439,000 Washingtonians across every county who received an Earned Income Tax Credit would also receive a Working Families Tax Rebate, with a slightly higher share of benefits going to rural counties;
  • The WFTR would put $95 million back into the state economy; and
  • Qualifying households would on average receive approximately $2,400 in EITC and WFTR combined.

The EITC has been an extremely successful federal poverty-reduction tool, not only by immediately reducing taxes for working families, but also by supporting their work efforts through rebates that support access to transportation and child care. Our state should capitalize on the many established benefits of the federal program by fully funding the WFTR.

The map below further emphasizes why funding the WFTR is a smart policy choice. It would benefit households in all 39 counties in Washington state. And in particular, working families in rural counties in central and eastern Washington would see an economic boost.

Click on graphic to see enlarged version.

WFTR Map

Click here for a printable listing of total EITC returns and estimated WFTR rebate amounts for Washingtonians by county and legislative district.

And for details about the Budget & Policy Center’s full revenue reform plan, which includes the WFTR, visit our Accountable Washington webpage. The Accountable Washington plan would clean up the tax code, bolster the economic security of people with middle and low incomes, and invest in important statewide priorities

1. Budget and Policy Center’s Analysis of Brookings EITC 2014 Tax Year data, https://www.brookings.edu/interactives/earned-income-tax-credit-eitc-interactive-and-resources/

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