A progressive coalition is gearing up for the new state budget session with hopes to boost social safety net programs and enact progressive taxation, items that have been on their legislative agenda for several years.
However, a pandemic-fueled recession and the holes blown in state and local budgets by the loss of sales tax revenue make this the time to push for new, progressive sources of revenue as well, said Andy Nicholas, senior fellow at the Budget and Policy Center.
“Progressive revenue is the responsible and necessary thing to do,” Nicholas said.
One proposal would be to put money toward the Working Families Tax Credit (WFTC), a financial instrument that has existed in Washington since 2008 but never been funded. The WFTC is modeled on the federal Earned Income Tax Credit (EITC), a tool that targets low-income households and reduces their overall tax burden, which can result in a tax refund.
The WFTC clocks in at about 10 percent of the EITC and is a “powerful tool to give an income boost to low-income households at tax time,” said Emily Vyhnanek, the Working Families Tax Credit campaign manager.
The goal is not just to fund the existing credit, which would send $350 to qualifying households on average, but to expand it to cover additional vulnerable groups including taxpayers with Individual Tax Identification Numbers (ITIN), such as immigrants, domestic violence survivors and unpaid caregivers, who do not qualify for the EITC because of their tax-filing status.
“COVID hit and we know there’s a huge need for direct cash assistance to people,” Vyhnanek said. “There’s no getting around the fact that at this time, people need cash.”
However, Washington is looking at an $8.8 billion budget shortfall through mid-2023, according to an analysis conducted by state forecasters in June. Progressive advocates are still feeling burned by the 2008 Great Recession, which was accompanied by austerity cuts by the state.
That means that a new source of progressive revenue is key to righting the ship and offering a lower tax burden to low-income households.
It’s no secret that Washington state has one of the most regressive systems of taxation in the country. The state and local governments are reliant on sales and property tax revenue, both of which put an increased burden on people in the bottom income bracket.
A 2018 study by the Institute on Taxation and Economic Policy found that households making less than $24,000 pay as much as 17.8 percent of their family income to the state versus 3 percent paid by the top 1 percent of income earners, those making $545,900 or more per year.
Those households have long needed assistance, progressives argue, but the coronavirus has laid bare the holes in the social safety net and put many low-income people in the position of choosing between paying for rent and other necessities.
Righting the “upside down” tax code has been on the progressive agenda for a long time. Some proposals have even gotten out of committee in Olympia, but never made it to the governor’s desk.
There’s no chance that a new kind of tax — such as capital gains — would pass without a legal challenge, making it unlikely that the state would realize new revenues for several years, said Jason Mercier, director of the Center for Government Reform at the Washington Policy Center.
But, funding the WFTC is something the legislature could do in any session.
“It makes a lot of sense for poverty reduction, targeting tax relief for low-income people,” Mercier said. “For whatever reason, they haven’t prioritized it in the budget.”
The pandemic has already caused the state to loosen rules and requirements around programs like the Temporary Assistance for Needy Families (TANF), allowing people to stay on the program even if they aren’t able to look for work or be involved in education.
The state has eased up on punitive measures such as sanctioning applicants for not completing “WorkFirst” hours while also increasing food benefits through the Supplemental Nutrition Assistance Program, said Lianna Kressin, the Basic Needs Campaign Lead at the Statewide Poverty Action Network.
Still, no one knows exactly how long these enhanced benefits will last, which stresses out clients who rely on the help.
“These basic needs programs are such a lifeline, and COVID has just proven that point even more,” Kressin said. “We keep hearing that more and more, and these protections have really helped.”
Preliminary results from a survey the Statewide Poverty Action Network is currently administering show that service providers hope that the state is able to maintain benefits, which have been overall positive for their clients.
“Several of my clients have depended on the benefits that they receive as a lifeline,” said one. “Without these benefits, a lot of my clients would be homeless, dependent on the kindness of strangers, and would probably lose custody of their kids because they wouldn’t be able to provide essential care for them.”
Survey results also found that allowing the maximum snap benefits, regardless of income level, and the suspension of TANF time limits have been helpful for struggling families.
The state needs to step up for low-income households and those hurt by the effects of the pandemic, especially in light of the inability of the federal government to authorize additional relief, said Liz Olson, policy analyst with the Budget and Policy Center.
“It is the critical question of this moment,” Olson said. “In the absence of that [federal] package that people really need, state policymakers have a critical role to play. Washington does need relief.”
Ashley Archibald is a Staff Reporter covering local government, policy and equity. Have a story idea? She can be can reached at ashleya (at) realchangenews (dot) org. Follow Ashley on Twitter @AshleyA_RC.
Read more in the Sept. 2-8, 2020 issue.