Tax Relief to Help Low-Wage Washington Residents

Because it lacks a state income tax, Washington State creates one of the highest tax burdens on poorer families, but some relief is being proposed, as the Washington State Budget & Policy Center outlines in this policy brief, in the form of a Working Families Credit which would give 350,000 Washington residents the equivalent of 10% of their federal Earned Income Tax Credit (EITC) refund.

This would reduce the tax bill for low-wage Washington workers by as much as 30% and, in combination with the federal credit, boost a minimum-wage worker's earning by up to 31%.  If enacted, this would make Washington the first state without an income tax to enact an EITC.

Twenty-three states have enacted EITCs, and Washington will be joined this year by efforts in Connecticut, Kentucky, and Pennsylvania.  Maryland during its recent special session expanded the refundable part of its EITC from 20% of the federal EITC up to 25%.  Pennsylvania is debating a 30% EITC that has been larded up with business tax giveaways that has dismayed advocates who worry about lost revenues and plan to support an unamended version in the state senate. Colorado has an EITC that is only distributed in certain years under the state TABOR law, so advocates are working to create a more consistent EITC for working families in the state.

State Earned Income Tax Credits are one of the most important tools for offsetting the regressive tax structures of most state tax systems, so this progress is encouraging.

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