Senate committee to consider tax exemption bill

The Washington State Senate’s Committee on Human Services, Reentry, and Rehabilitation is due to vote on a bill that would significantly expand the state’s Working Families Tax Exemption program.

The WFTE program was first passed by the State Legislature in 2008. It was based on the earned income tax credit, a federal program that pays a portion of an individual’s income tax back to them, depending on their marital status, number of children and income. Like the earned income tax credit, the WFTE provides for a tax refund for low- and middle-income individuals and households; because Washington has no state income tax, this program applies to sales and use taxes. To qualify for the WFTE, an individual must have received an earned income tax credit on their federal taxes; the WFTE is based on the size of that rebate.

The bill currently under consideration by the Senate, HB 1297, was introduced in the State House of Representatives in mid-January by Rep. My-Linh Thai (D-Bellevue).

The bill would decouple the state program from the EITC, meaning that individuals would not need to be granted a federal tax credit before applying for the exemption to their state taxes. HB 1297 would also tweak the income brackets the program operates with, slightly reducing the size of remittances for upper-income households.

The bill’s most important consequence would be the expansion of the program to individuals with an individual taxpayer identification number. ITINs are issued by the Internal Revenue Service to individuals who want to pay taxes but are ineligible for a Social Security number — most often refugees or undocumented immigrants. Individuals who pay taxes with ITINs are ineligible for almost all forms of governmental assistance, even though they are often in the lowest income groups.

HB 1297 has been praised from both sides of the political spectrum. During a March 9 debate on the floor of the House, Rep. Noel Frame (D-Seattle) lauded the bill as a way to re-align Washington’s regressive taxation system, which she described as “out of line with our values.” Frame argued that the WFTE reform would “build a ladder to the middle class.” On the other side of the aisle, co-sponsor Rep. Drew Spokesbary (R-Auburn) pointed out that Republicans have long been arguing for reducing the tax burden on Washingtonians. Rep. J.T. Wilcox (R-Yelm), the House minority leader, said that passage of the bill would be “a victory for compassion, people who struggle and common sense.”

The most compelling voice in favor of HB 1297 was that of Thai, whose family fled Communist Vietnam in the 1980s. She described through tears how her parents had gone from being high-earning professionals in their home country to low-wage workers, who still “diligently paid their taxes every year long before [they] became naturalized citizens.” She concluded her remarks with a reminder of how the expanded tax exemption would improve people’s lives.

“The Working Families Tax Exemption is our promise to people like my parents that, if they work hard, they can achieve their dreams, build better lives for their children, and their community will rise up to support them,” she said.

After the March 9 debate, the House passed HB 1297 overwhelmingly (94-2) and moved the legislation on to the Senate. It is due to be voted on by the Committee on Human Services, Reentry, and Rehabilitation on Thursday afternoon. If approved, it will need to be passed through the Senate Rules Committee and voted for on the floor of the Senate before being put on Governor Jay Inslee’s desk to be signed into law.