Poor state residents could get tax credit

OLYMPIA -- Forty dollars might not sound like much. But for roughly 350,000 families in this state, it is the difference between sending children to school with empty stomachs, putting gas in the car to resume a job hunt or buying diapers.

And that's the argument Democratic lawmakers made late Thursday night when the House voted to expand the federal Earned Income Sales Tax credit to low-income Washington residents, despite Republican critics who said the move displayed lack of common sense. The Senate has already OK'd the move, but differences between the two bodies' plans must still be resolved.

While the tax credit would refund from $20 to $275 during its first two years, it would cut $110 million from the state general fund annually and would come with a $7 million annual price tag to handle implementation costs, which include hiring 44 state workers to administer the program.

And Republicans say the Legislature would have to reapprove the credit every year in the state budget, and that could come at a cost to other valuable social services.

"They talk about our regressive tax system, they talk about housing, they talk about the unaffordability of gas. ... My point is: If you want to change the tax system, change it -- you have the votes," said House Minority leader Richard DeBolt, R-Chehalis.

"Why spend $7 million to give out $83? Why not just give out a sales tax voucher for three times that amount?" DeBolt said. "They might not even give that money out if the budget is in trouble, and we know it's in trouble."

The credit wouldn't take effect until 2009 and would refund only 5 percent of the federal rebate, but that number would be boosted to 10 percent in the measure's second two years, provided it is reapproved in the state budget.

And while the increase would double refunds, it would cut an additional $54 million from the state budget -- a budget that DeBolt said is headed for trouble in the looming recession.

Washington's reliance on a sales tax as a major revenue stream has long been criticized for being regressive because it taxes a flat rate per dollar; people with lower incomes pay out a greater percentage of their income than those making more money.

Eliminating sales tax from food purchases was the last major change made to Washington's sale-tax structure, doing so 30 years ago.

State families with an income of $17,000 or less pay out at least 17 percent of their income in taxes according to figures compiled by ACORN, an anti-poverty advocacy group.

One of the potential recipients of the break is Everett resident Agnes Cieslik. Cieslik, 31, is a single mother of one who was recently laid off and is facing the foreclosure on her home.

"Where do I even begin? It's a matter of some days -- some weeks -- do I have enough money for milk? Do I have money to go to a grocery store? Sometimes I don't have the money for gas." Cieslik said. "Maybe for most people it wouldn't make a difference, but to me, yeah, it actually would."