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Eye On Olympia

Working Families Tax Credit — an increasingly popular idea…

The legislative news service Stateline has a good roundup today on states matching the federal Earned Income Tax Credit.

This was a big issue in this year's legislative session, when Washington became the first non-income-tax state to approve a state match for the federal tax checks.

A total of 24 states now have such a program, Stateline's Christine Vestal reports, ranging from 3.5 percent state match in North Carolina to 32 percent in Vermont. (Washington, D.C.'s match is 35 percent, and Wisconsin has a unique approach, with a state match ranging from 4 percent for a family with one child to 43 percent with three children.)

Washington State, however, is the first state without an income tax to try this. Writes Vestal:

Experts say the new law (scheduled to take effect in 2009 for the 2008 tax year) could open the door for eight other states — Alaska, Nevada, New Hampshire, Wyoming, South Dakota, Tennessee, Texas and Florida — with no income tax.

And later in the story:

As a result of the recent surge in new state EITCs and expansions of existing programs in eight states, benefits will reach 2.5 million more people than in 2006, bringing the total number who benefit from state EITCs to 7.8 million. New laws since 2006 have increased state benefits by $617 million, raising the total state benefits to $2.2 billion, according to data provided by the Center on Budget and Policy Priorities (CBPP).

The state tax benefits are designed to supplement the federal EITC, which amounted to $43.3 billion in 2007 and is expected to total $44.7 billion this year – more than the government spends on either Food Stamps or welfare.

“EITCs basically increase the take-home pay of low-income workers,” said Elizabeth Kneebone of the Brookings Institution. “That’s especially important now because wages have stagnated since 2000, and food, energy and housing prices have been rising. The extra money in workers’ pockets helps fill the gap,” she said.

Republican lawmakers in Washington say the state is moving too fast. They cite a $2 billion to $2.4 budget deficit projected in the 2009-2011 budget cycle, and say the new program -- tentatively slated to start next year -- would only worsen that.

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