WA starts work on sales tax credit for poor

Washington state is launching a new tax credit for the poor, but lawmakers are waiting until after this fall's elections to tackle the hard part: how they'll pay for the $110 million worth of rebates.

Gov. Chris Gregoire on Tuesday gave final approval to a startup plan for the "Working Families" tax credit program, directing the state Revenue Department to assemble workers and infrastructure needed to administer the possible sales tax rebates.

If the Legislature finds a way to pay for the benefits, the state will eventually send rebate checks to low-wage Washingtonians who qualify for the federal Earned Income Tax Credit.

State officials estimate about 337,000 households would apply for a state rebate in the 2010 fiscal year, with a price tag of about $110 million in lost sales tax revenue during the 2009-2011 state budget cycle.

That could be a problem for state lawmakers, who are facing a projected deficit of $2 billion or more when they convene in January to write the next two-year budget.

On Tuesday, Gregoire acknowledged there might not be enough money to start sending out rebate checks right away - a fact that led the governor to consider at least a partial veto.

But Gregoire said she ultimately was persuaded by lawmakers' arguments that, even if the money were earmarked today, it could take about two years to set up the program and start issuing checks.

"I don't know that there's going to be enough money there to do it," Gregoire said. "But (lawmakers) desperately want the structure in place, so that when that opportunity comes, it's not delayed."

The tax credit program was a priority of Senate Majority Leader Lisa Brown, D-Spokane, and Sen. Craig Pridemore, D-Vancouver, a top Democratic budget writer. Neither was in Olympia on Tuesday to watch Gregoire sign the bill into law.

Minority Republicans have pounced on the tax rebate as one of the Democrats' "punts" on big-ticket programs, conveniently left unresolved until after the statewide elections in November.

The GOP also argues that the Legislature could put more money in needy taxpayers' hands by giving an immediate tax break of some kind, rather than setting up a new government program to administer the rebates.

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The tax credit bill is SB6809.

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On the Net:

Governor: http://www.governor.wa.gov

Legislature: http://www.leg.wa.gov