We all know the massive toll that COVID-19 pandemic and its economic fallout have taken on us all. But at long last, we are starting to see hopeful signs of better days ahead – increased vaccinations, restrictions lifted, and plans for kids to return to school. So now – right now – is when Washington state needs to invest in proven strategies that will ensure our state’s long-term health and economic recovery.
House Bill 1297, which funds an updated Working Families Tax Credit, is just that kind of proven strategy. It puts direct, flexible cash into the hands of those who need it most. In our respective fields of economics and public health, we know that this kind of direct cash is a powerful tool for getting our economy on track and improving the collective health and well-being of people in our state.
Modeled after the highly successful federal Earned Income Tax Credit (EITC), this policy would provide working families with an annual base credit of $500 to $950, depending on family size, with the credit phasing down as incomes rise. Because nearly a half-million Washington state families would qualify for the credit, it would reach one in four kids. This type of direct, flexible cash can be the lifeline that helps someone start a microbusiness, or allows them to pay for needed medical care or unexpected car repairs.
Due to historical and long-standing racist policies – redlining and employment discrimination being two – that have channeled wealth and opportunity to white people at the expense of Black, Indigenous, and people of color (BIPOC), many communities of color haven’t had the savings that has allowed others to weather the pandemic. This tax credit would help rectify that inequity. It would reach nearly 36% of our state’s BIPOC households – an important outsized benefit given the fact that BIPOC constitute a quarter of the state’s population. The policy also importantly includes people who file their taxes with an Individual Tax Identification Number (ITIN), which includes undocumented immigrants, who in many cases have shouldered the worst impacts of the pandemic.
By putting money into the hands of people who have been hardest hit over the last year, HB 1297 will help struggling families recover. It also makes good economic sense. Getting cash to people who need it most is a smart way to jump-start the economy and build up economic resiliency. State tax credits like this one can infuse $1.50 to $2 into local economies for every dollar a recipient receives. And we can expect this local stimulus to work quickly: In 2020, households with less than $500 in savings that received federal stimulus checks spent half of their check within 10 days.
The proposed tax credit is also a critical part of our larger effort to rebuild a healthier Washington. As we each know and as research demonstrates, when people and families have a stable place to live and enough food, their physical and mental health improve. Tax credits like these have been proven to reduce mental distress, boost physical wellbeing, and improve health outcomes for mothers and their infants, especially for Black mothers.
The evidence is strong that tax credits like this one advance equity and help families meet critical needs while also stimulating the economy. Funding the Working Families Tax Credit is a smart way for Washington state to build economic resiliency and support our families. More than ever, it’s the right policy for lawmakers to enact now.
Katie Baird, Ph.D., is a professor of economics at the University of Washington – Tacoma. Aaron B. Katz, C.P.H., is a principal lecturer emeritus at the University of Washington School of Public Health.