Note: please note that this issue brief should (a) link back to the issue overview on this topic, (b) be focused either the local, state, national, or global level, and (c) be neutrally presented, based on facts, and include footnotes for each of the items. See the Research Guide and Information Sources to assist you.
Goal Statement
To achieve economic equality for Latinos in Washington State and locally in Walla Walla through enhancing tax fairness.
Scope of the Problem
- Washington State has no income tax. The majority of the state’s revenue comes from a sales tax, making Washington the state with the most regressive tax structure in the nation.
- In 2000 20.9% of Washington’s Hispanics were living in poverty, compared to 10.6% of Washington’s Whites.
- The mean household income is declining for everyone in the state, but it is declining fastest for Latinos.
- Very few Latinos know about the EITC. Nobody knows for sure what the number is, but my survey of 52 people suggests only 15% of Latinos know about the EITC. This means many who qualify do not claim the EITC.
- There are many complicated eligibility requirements that disqualify Latinos more than non-Latinos:
- People who are under 25 and who file taxes with Individual Taxpayer Identification Number (ITIN) are disqualified.
- Married couples qualify for a smaller EITC package. But the EITC only increases per child for up to two children, so larger families do not get proportionately larger credits.
- Politicians will sometimes knowingly implement taxation policies that are not necessarily the fairest for everyone because they fear that progressive tax structures will invite poor people into the state and discourage big, rich businesses from residing and working in the state.
Current Policy summary of current policies in the form of legislation, programs, and funding
- Washington State Department of Community Trade and Economic Development (CTED) has established an Asset Building Coalition (ABC). The ABC works around the state to increase assets within communities through:
· Creating a range of private and public prosperity products for asset building;
· Developing and promoting public and lending policies for asset building;
· Marketing savings, smart borrowing and benefits like the EITC; and
· Expanding financial literacy opportunities and outcomes across the state.
- The Asset Building Coalition received $2.8 million from the state legislature in 2007-2009.
- The Working Families Rebate is a statewide version of the Earned Income Tax Credit. It was passed in 2008, but in the midst of the economic crisis, it has remained unfunded.
- Every year legislators suggest implementing a state income tax (which would make the tax structure much more progressive). Unfortunately, it has yet to gain much support, though many legislators recognize and agree that it is the fairest way to tax residents.
- To combat the current economic crisis, legislators are cutting many programs and it is likely that without funding, many good programs already in place to combat poverty will be ineffective.
Policy Options
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· Make the EITC more accessible to Latinos in Washington.
o Conduct bilingual outreach targeting Latinos. This can be done by capitalizing on Latinos’ sense of familial responsibility by showing that claiming the EITC is good for the family.
o Require paid tax preparers to inform their clients when they qualify for or claim the EITC.
o Change the eligibility requirements.
· Fund the Working Families’ Rebate.
o Because the Working Families’ Rebate will give a boost to the state’s lowest income earners, it will help to help to counter the regressive tax structure.
· Continue researching these issues:
o There should be an accurate measure of who claims the EITC by race, gender, and socio-economic status.
o More research should be done on how the Working Families’ Rebate can specifically help Latinos, and how it can best be made accessible to Latinos.
· Change the state’s tax structure so that it is less regressive.
o Implement a progressive income tax and shrink the sales tax.
This recommendation is particularly important. My research is necessary largely because Washington has such a regressive tax structure. The EITC (both the federal and the state versions) is frequently discussed as a way to counter regressive tax structures, so if Washington’s tax structure was less regressive, there would be less of a need for the EITC.
Key Organizations/Individuals contacts for public and private organizations and key individual
- Washington Tax Fairness Coalition - http://wataxfairness.org/
- This group of organizations believes that Washington’s tax structure is outdated and unfair and they work to push fairer legislation forward. This group partnered with me to conduct my research.
- Washington’s Asset Building Coalitions - http://www.cted.wa.gov/site/994/default.aspx
- The locally-based coalitions are working to increase assets in their towns. In 12 cities the coalitions are conducting extensive EITC outreach.
- Washington State Budget and Policy Center - http://www.budgetandpolicy.org/
- The Center conducts research to promote progressive budget and tax reform in Washington. They analyze current state fiscal issues, and provide new solutions that take low and moderate-income people into account. They conduct local and state-wide outreach programs so that they’re research affects policy makers. They have conducted research on the positive benefits of a state EITC.
- The United States Internal Revenue System – http://IRS.gov/
- The IRS encourages knowledge of the EITC by providing local organizations with EITC outreach kits.
- www.StateEITC.com
- This site offers research and resources about state EITCs. It is particularly useful because it tracks and documents state EITCs across the nation.
- www.WALatinos.org
- My full research and an executive summary can be found here, along with more research addressing inequalities for Latinos in Washington State in issues such education, health care, and civic engagement, among other topics. This is the only current research being conducted that addresses social inequalities for Latinos in Washington.
- blog.WALatinos.org/
- This is a blog where Whitman students engage in dialogue about this and similar research. If you have questions or comments or are curious to see what my classmates and I are doing with our research, check us out!
Glossary of Terms
Bibliography web sites, reports, articles, and other reference material
1. Brunori, David. “The Limits of Justice: The Struggle for Tax Justice in the States.” In
Tax Justice edited by Joseph J. Thorndike, and Dennis J. Ventry Jr., 193-219.
2. Census Bureau, U.S. Factifinder. SF 2 and 4. 2006
3. CTED, “Washington Asset Building Coalition Moves Forward,” http://www.cted.wa.gov/site/994/default.aspx
4. Hatcher Group, “State EITC Online Resource Center,” January 2, 2009 http://www.StateEITC.com
5. Howard, Christopher. The Hidden Welfare State: Tax Expenditures and Social Policy in the United States. New Jersey: Princeton University Press, 1997.
6. IRS Publication 596: Earned Income Credit (EIC), 2007.
7. ITEP, “Washington’s Tax System is the Most Regressive in the Nation,” January, 2003.
8. Kirchhoff, Sue. “How Will the $787 Billion Stimulus Package Affect You?” USA Today. February 17, 2009. http://topics.nytimes.com/topics/reference/timestopics/subjects/u/united_states_economy/economic_stimulus/ .
9. Lee, Andrea, and Remy Trupin. “A Working Families Credit for Washington State,” Policy Brief. Washington State Budget & Policy Center, 2008.
10. Lui, Meizhu, et al., The Color of Wealth: the Story Behind the U.S. Racial Wealth Divide. New York: New Press, 2006.
11. Smeeding, Timothy M., Katherin Ross Phillips, and Michael A. O’Conner. “The Earned Income Tax Credit: Expectation, Knowledge, Use, and Economic Mobility.” In Making Work Pay, Edited by Bruce D. Meyer and Douglas Holtz-Eakin. 301-328. New York: Russell Sage Foundation, 2001
12. Stokes, Atiya Kai. “Lationo Group Consciousness and Political Participation,” American
Politics Research 31 (2003): 361.
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