Washington’s Working Families Tax Credit

Ellie Graham, MD, FAAP
WCAAP Legislative Committee
WCAAP Equitable Care Work Group

The Working Families Tax Credit (WFTC), or Recovery Rebate, became a funded law this month with overwhelming bipartisan support in our state legislature.  This is a huge win for people across Washington State.  The original WFTC was passed in 2008 but never funded until this year. Advocacy focused on ensuring people have direct, flexible cash to meet their essential needs, especially in a pandemic, finally succeeded after 13 years. And it’s a critical move toward addressing Washington state’s upside-down tax code. 

The Recovery Rebate will reach 420,000 households in Washington state with an annual base cash rebate ranging from $300 to $1,200, depending on household size and income level. This type of cash in people’s pockets will help ensure they are able to meet their basic needs – like to pay for rent and groceries, save for emergencies, or even have the funds to jumpstart a microbusiness.

WFTC will also contribute to a more equitable state. The policy will have an outsized benefit for Black, Indigenous, and people of color. While they make up 25% of the state’s residents, they will make up 36% of Recovery Rebate recipients. The policy will also support 25% of households with kids in our state.

Based on the federal Earned Income Tax Credit or EITC, the country’s largest anti-poverty program, Washington State now joins 29 other states and the District of Columbia in implementing its own state-level version of the Earned Income Tax Credit. Importantly, Washington state’s version is highly innovative. It has a base credit for all recipients to ensure greater support for those with the lowest incomes. It also includes eligibility for Individual Tax Identification (ITIN) filers that includes undocumented immigrants, some survivors of domestic violence, certain student visa holders, and more.

Funding the WFTC is a critical move toward balancing our state’s worst-in-the-nation tax code.  In 2018, the 20 percent of families with the lowest incomes paid 17.8 percent of their income on state and local taxes, while the 1 percent of families with the highest incomes paid only 3.0 percent.  This meant the lowest-income families had to work 9.3 weeks out of the year to pay their state and local taxes while the highest-income families had to work only 1.6 weeks.*

WCAAP supported this legislation and was part of a broad and diverse coalition of more than 45 organizations spanning economic and racial justice groups. In addition, countless people who would qualify for this rebate shared their stories with the legislature and elsewhere.

* Institute on Taxation & Economic Policy: https://itep.org/category/publications/?tag=washington