Expand Equity and Economic Opportunity/ Blueprint

Thirteen-Year Effort to Implement a Working Families Tax Credit Ends in Success

Thirteen years ago, when Marcy Bowers was carrying out listening sessions with fellow Washington state residents impacted by poverty, she heard three repeated themes: people had too little money, necessities cost too much, and the systems intended to help instead made them feel mistreated and disrespected.

In response to all three issues, the Statewide Poverty Action Network, where Bowers currently serves as Executive Director, partnered with the Washington State Budget & Policy Center to put forward a bill in 2008 to implement a statewide Earned Income Tax Credit (EITC) that mirrored the federal version, giving eligible families a 10 percent match of the federal credit. The traditionally bipartisan EITC is considered perhaps the country’s most effective tax credit.

Called the Working Families Tax Credit, it passed in the Washington legislature quickly and easily, but without any money allocated to fund it. That year’s recession caused alarming budget deficits, worsened in Washington because the state is one of nine without an income tax, creating a heavy reliance on the sales tax, which can be especially volatile in times of economic crisis. (The others are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.)

The Washington state EITC remained on the books but unimplemented until the Statewide Poverty Action Network again partnered with the Budget & Policy Center to lead a coalition pushing for a bill to finance the tax credit, and The Rockefeller Foundation stepped forward to fund the effort.

“I went out to Washington in September 2019 to meet Marcy and the rest of the coalition. I was so impressed by the number of engaged organizations and their diversity that I thought the best thing Rockefeller could do to help was to give them a flexible grant large enough to meet the coalition’s needs, and then stay out of their way,” says Danielle Goonan, the Foundation’s Managing Director, U.S. Equity and Economic Opportunity Initiative.

When House Bill 1297 finally passed in April, Bowers, watching on her laptop, burst into tears. The governor signed it into law on May 4.

A Change for a State Named as Having the U.S.’s Most Unfair Tax Structure

Starting in 2023, an estimated 420,000 Washingtonians will receive rebates of between $300 and $1,200 as part of the Working Families Tax Credit. The program is expected to pay out about $250 million a year. Washington state now joins 29 other states and the District of Columbia in providing a state-level EITC.

While many cash assistance programs exclude immigrant community members despite the fact that they contribute heavily to the economy, Washington state will now become the fifth state in the nation to offer EITC to people who file taxes with Individual Tax Identification Numbers (ITIN). Last year, California and Colorado expanded their state-level EITCs to include ITIN filers. Earlier this year, Maryland and New Mexico expanded their EITC payments to ITIN filers. The Rockefeller Foundation was indirectly involved with these coalitions through a grant to the EITC Funders Network.

All this comes in a state that was identified by the Institute on Taxation and Economic Policy as having the most unfair tax structure in the nation, with the poorest residents paying nearly six times as much of their incomes in taxes as the wealthy.

In 2019, Washington state’s official poverty rate dipped below 10 percent for the first time this century. But Bowers notes that is misleading as it masks disparities for people of color and the rise in deep poverty. And individual economic insecurity has implications for democracy as a whole, she says, because people who believe the system doesn’t really work for them often don’t participate in political life.

Recently Bowers sat down to recount some lessons learned that are applicable to other states without state income taxes, but also to states seeking implement or expand EITC.

THE BLUEPRINT:

Steps for Passing and Funding a State EITC

  1. Create a broad and diverse coalition. Statewide Poverty Action Network and the Washington State Budget & Policy Center led a diverse group of 46 organizations all working to fund Washington’s EITC. The Working Families Tax Credit Coalition included labor groups, immigrant rights work, domestic violence survivors’ advocacy groups and many more.
  2. Look for ways to simplify administrative infrastructure costs. Instead of following the federal formula, the coalition proposed moving from a percentage match to a flat amount—as soon as someone earns a single dollar, they are eligible for the full credit, and the amount of the credit increases with the number of household children until it tapers off as income rises. The simplification dropped administrative costs substantially, from $61.3 million to $23.7 million by the third biennium. That was easier for legislators to swallow.
  3. Actively seek bipartisan support. Common ground can be found with anti-tax Republicans, for instance. At the same time, chose the bill’s sponsors in each chamber carefully. Seek lawmakers who have strong relationships with their legislative colleagues, and who have a personal connection to EITC and the need to support low-income families. For example, both of the prime sponsors had a personal connection to Washington’s refugee communities—one as the child of refugees and the other as a refugee herself. Both could speak from experience about how the basic support services helped their families and shaped their trajectories.
  4. Take the opportunity to frame tax credits to families as similar to any other tax credits or breaks. This helped Washington advocates avoid making the EITC subject to appropriation every two years. Bowers noted that it was helpful to remind legislators that if corporations don’t need to renew their tax breaks every budget cycle, low-income families shouldn’t need to either. This helped make the credit part of the general operating budget instead of dependent on dollars from a specific revenue source.
  5. Get as many people to testify before the legislature as possible, showing the breadth of the coalition and emphasizing the huge difference that a few extra hundred dollars a year would make in their lives. Lawmakers in Washington heard from people across the state about how people would be able to afford medicines they’ve put off taking, pay for much-needed car repairs or get new clothes for their growing children.
  6. At the same time, emphasize ongoing public communication. The coalition’s communications team held letter-to-the-editor workshops, placed articles, created some fun and catchy social media memes and kept the drumbeat going through the entire legislative session.
  7. Bowers also noted that the stimulus checks approved in response to Covid-19 were also helpful in that they demonstrated that quick cash payments could be life-saving for households and the stimulus money quickly found its way back into the community as a whole.

A Symbolic Shift in Narrative

While the Washington economy has started to recover from the Covid-19 shutdowns, gains have not been evenhanded. Unemployment rates for lower-wage and service workers have remained higher than higher-paid tech workers and others able to work remotely.

Bowers, who began working with the Statewide Poverty Action Network 20 years ago as a volunteer, says she’s waiting for the day when the governor officially signs the bill into law. “That night, I’m probably going to drink some champagne, and I’m probably going to figure out how to socially-distant hug some people and I’m probably going to do some more crying,” she says.

Marcy Bowers and Governor Jay Inslee at the public signing event.

And although it’s not as tangible as dollars in a pocket, Bowers also celebrates what she views as a “symbolic shift away from the narrative that people with low incomes can’t be trusted with their money. That is based in racism and sexism,” she says. “With this move, we are going to be treating people with dignity and respect, giving them resources and letting them decide what to do with it.”

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