Washington state needs a Recovery Rebate now

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Washington state needs a Recovery Rebate now

The Rebate – an updated Working Families Tax Credit – would provide cash to around 500,000 households

By - January 19, 2021

Updated on January 28, 2020

All of us should be able to put food on the table, have a roof over our heads, and provide for our loved ones. But, long before the pandemic, households with low and moderate incomes already struggled to afford the basics. Black, Indigenous, and other communities of color – including many immigrant communities – have been especially impacted by these inequities due to racist long-standing racist barriers like a lack of access to health care, discrimination in hiring practices, and redlining. And this has only worsened during COVID-19’s economic fallout.

To get through this pandemic together and begin to address longstanding inequities, Washington’s lawmakers must make bold and direct investments in people with low and moderate incomes by providing a Recovery Rebate so they can meet their basic needs.

Lawmakers can invest in communities with a Recovery Rebate

A Recovery Rebate could be implemented by funding an updated Working Families Tax Credit. Lawmakers initially passed a Working Families Tax Credit in 2008, but as the Great Recession hit and the state faced revenue shortfalls similar to today, budget writers at the time chose not to fund it. This choice – part of a larger cuts only approach – led to a slower economic recovery for the state and prevented a commonsense policy to provide flexible, direct cash to those who needed it most from being implemented. We have already seen the consequences of failing to provide support when people need it most: worsened inequities and greater financial hardship in the long-term. This time, we must make a different choice.

Fortunately, legislation introduced this session by Representative My-Linh Thai and Representative Drew Stokesbary in the House (House Bill 1297) and by Senator Joe Nguyen in the Senate (Senate Bill 5387) would go a long way in supporting Washington residents through the state’s economic recovery from COVID-19 and beyond.

The updated Working Families Tax Credit offers a base credit amount of $500 to eligible tax filers, with additional funds for households with children (up to $950 for a household with three kids). The credit amount phases out as income increases. That means the eligible taxpayers with the lowest incomes could get the highest rebate possible, providing greater support for those most struggling to make ends meet. The legislation also further improves the policy by expanding the rebate to include immigrant workers by expanding access to taxpayers who file taxes using an Individual Tax Identification Number (ITIN) in lieu of a Social Security Number. ITIN filers – a diverse group which includes undocumented people, students, and some survivors of domestic violence – are unjustly excluded from federal tax credits, despite paying taxes at all levels of government.

More than ever, the reasons for providing a Recovery Rebate to Washington households with low and moderate incomes are clear.

By passing and funding an updated Working Families Tax Credit, lawmakers can:

  • Advance racial and economic justice: The rebate would provide a larger share of benefits to Black, Indigenous, and People of Color (BIPOC), who have been most harmed by longstanding racist policies, as well as the pandemic’s economic and health crises. BIPOC tax filers make up 36% of those eligible for the credit in comparison to 25% of the state’s population.
  • Speed up the state’s economic recovery: Small businesses do better when people have money to spend in their communities, especially when dollars are directed to people with low incomes. State tax credits like the updated Working Families Tax Credit have been estimated to infuse $1.50 to $2 into local economies for every dollar a recipient receives. And households with less than $500 in savings spent half of their CARES Act stimulus within ten days of receipt on essentials like food.
  • Promote community health: People are healthier overall when they are not worried about how to make ends meet. Tax credits like the Recovery Rebate/updated Working Families Tax Credit have been linked to improved health outcomes for recipients and their families, from improved mental health to healthier moms and birthing parents and their babies. And positive health impacts are stronger in states with larger credits.
  • Fill gaps in existing support systems: A Recovery Rebate would strengthen everyday people’s ability to meet their basic needs. The rebate would work alongside existing public assistance programs to weave a stronger network of public support. It fills an important gap by reaching people who are struggling to pay bills but may not qualify for other federal and state assistance programs.

The choice is clear: Lawmakers can provide direct, flexible cash to people struggling to make ends meet, begin to address deep inequities, and support our long-term health and economic recovery. Or they can once again miss this opportunity to build greater economic security for all Washingtonians.

Updated January 28, 2020: This blog post was updated to include the Senate bill number.

About Margaret Babayan, Senior Policy Analyst

Margaret joined the Budget & Policy Center’s research and policy team as a policy analyst after serving as the 2018-19 Betty Jane Narver Policy Fellow.

Read more about Margaret