The Working Families Tax Credit to be enacted in Washington state

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The Working Families Tax Credit to be enacted in Washington state

In an historic win, nearly one in six households will receive an annual Recovery Rebate

April 16, 2021

The Working Families Tax Credit, or Recovery Rebate, is set to become law – marking a huge win for people across Washington state. This achievement is the culmination of thirteen years of advocacy focused on ensuring people have direct, flexible cash to meet their essential needs. And it’s a critical move toward addressing Washington state’s upside-down tax code.

The tax credit, sponsored by Representative My-Linh Thai, received overwhelming bipartisan support. It passed the House with a vote of 94-2-2 and the Senate with a 47-2 vote. It will soon be delivered to Governor Jay Inslee for his signature.

The Recovery Rebate will reach 420,000 households in Washington state with an annual base cash rebate ranging from $300 – $1,200, depending on household size and income level. This type of cash in people’s pockets will help ensure they are able to meet their basic needs – to pay for rent and groceries, save for emergencies, or even have the funds to jumpstart a microbusiness.

The Working Families Tax Credit will also contribute to a more equitable state. The policy will have an outsized benefit for Black, Indigenous, and people of color. While they make up 25% of the state’s residents, they will make up 36% of Recovery Rebate recipients. The policy will also significantly benefit women and gender diverse people, and support the households of one in four kids in our state.

This achievement is the culmination of thirteen years of advocacy focused on ensuring people have direct, flexible cash to meet their essential needs. And it’s a critical move toward addressing Washington state’s upside-down tax code.

Based on the federal Earned Income Tax Credit or EITC, the country’s largest anti-poverty program, Washington state now joins 29 other states and the District of Columbia in implementing its own state-level version of the Earned Income Tax Credit. These types of federal and state tax credits are shown to have notable benefits on the physical and mental health of residents of the households that receive them as well as significant health and educational benefits for kids who live in households receiving credits.

Importantly, Washington state’s version of the credit is highly innovative. It has a base credit for all recipients to ensure greater support for those with the lowest incomes. In addition, the Working Families Tax Credit takes a more inclusive approach to eligibility for workers without children.

With the passage of House Bill 1297, Washington state also becomes the fifth state in the nation to include eligibility for Individual Tax Identification (ITIN) filers. ITIN filers are an important group of taxpayers, including undocumented immigrants, some survivors of domestic violence, certain student visa holders, and more. This is part of a growing national movement to make cash assistance more inclusive of immigrants.

The Working Families Tax Credit is also a critical step toward balancing Washington state’s worst-in-the-nation tax code in which those making the least pay a higher rate of state taxes as a share of income than the ultra wealthy. By coupling the Working Families Tax Credit with progressive and equitable revenue – like a capital gains tax on extraordinary profits – lawmakers can make even further progress in turning our tax code right-side up.

Washington state now joins 29 other states and the District of Columbia in implementing its own state-level version of the Earned Income Tax Credit.

This historic passage of the Working Families Tax Credit is a testament to a broad and diverse coalition of more than 45 organizations spanning economic and racial justice groups, immigrant rights advocates, small business incubators, labor, direct service providers, domestic violence advocates, and more. This is in addition to countless people who would qualify for this rebate who shared their stories with the legislature, in the media, on social media, and elsewhere.

The Department of Revenue will administer the program. When the program begins in 2023, payments will be distributed in a way that honors the dignity of those who receive it – by enabling individuals and families to use the money in the way that they most need.