OLYMPIA – More tax relief could be on the way for many working families across Washington.
House lawmakers, debating late Thursday night, voted to launch the Working Families Tax Credit, which would put millions of dollars a year back into the pockets of hundreds of thousands of low- and moderate-income families. The program, which would be in addition to federal economic stimulus checks due to begin arriving this spring, is expected to win Senate approval in the days ahead.
The bad news: State payments – initially averaging $85 a year – wouldn’t start until 2009 or later.
“It’s going to benefit those that need it most,” Rep. Timm Ormsby, D-Spokane, told House lawmakers late Thursday night. “The toughest jobs involve pickaxes and bedpans and wheelbarrows. They involve roomfuls of 3-year-old children. … They have families, they need this relief.”
People who qualify for the federal Earned Income Tax Credit – a working family of four earning up to $40,000 a year, for example – would qualify for the state match.
The checks – 5 percent of the federal credit initially – would rise to an average $170 by 2011. But lawmakers included an escape clause: The payments depend on whether the state can afford the millions of dollars they would cost. And that decision will be made next year.
Because of that, Republican critics called it an empty promise. They also criticized the ongoing administrative cost, estimated at about $7 million a year with 43 new staff to run it.
Passage of the proposal in a cautious, slim-budget legislative year was a major victory for proponents, including Senate Majority Leader Lisa Brown, D-Spokane.
An analysis prepared by the private Washington State Budget and Policy Center shows that federal Earned Income Tax Credits are far more common in rural areas and low-income urban pockets. In parts of rural northeastern Washington and in central Spokane, nearly one in five families qualifies.
The federal credit can be substantial, from a maximum $428 for couples with no children to $4,716 for those with two or more. Washington’s payments are expected to total $33 million a year initially, rising to $77 million by 2010.
Brown and others say the checks – which are considered a refund of sales taxes – would slightly counterbalance the state’s regressive tax structure, under which poor people pay several times as high a percent of their income in taxes as the wealthy. About 337,000 Washington families are expected to qualify.
Rep. Tami Green, D-Lakewood, called the plan the biggest improvement on the state’s tax system since Washington long ago eliminated the sales tax on food.
The bill passed 57-37, shortly before midnight. It now goes to the Senate, which has already approved the proposal and is expected to concur with the final version.
Republicans decried the estimated $7 million administrative cost of the program every two years, saying the state should simply give people a tax break and leave the money in their pockets.
“Shoot, let’s take some money off the taxes they pay for gasoline to get to work,” said Rep. Maureen Walsh, R-Walla Walla. Other Republicans suggested a tax break on work clothes or on children’s clothing.
Hoquiam Democrat Lynn Kessler said that would be hard to do.
“What do they do, carry a card saying ‘I’m poor, give me a sales-tax exemption’?” she said. When she was a young struggling mother with three kids, she said, a relative’s occasional gift of $50 was like “manna from heaven,” allowing for new shoes or a trip to McDonald’s. The tax-credit checks will be at least as helpful, she said.
But critics suggested the bill is a hollow shell until lawmakers put some money behind the payments. And budget staff already predict a $2.4 billion shortfall in the next budget cycle, they said.
“This is not the way to serve the working poor,” said Rep. Lynn Schindler, R-Otis Orchards. “This is just a one-time gift that you may not even get.”
House Minority Leader Richard DeBolt said if Democrats believe the state’s tax structure is regressive, they have more than enough votes to do something about it. “You have 63 votes” out of 98, he told them. “Change it. … This bill is a platitude.”