Does Washington's Working Families Tax Credit provide the minimum benefit to all EITC-eligible households?

[MaxGhenis]

Washington makes EITC-eligible households eligible for the WFTC, though the amounts phase out with income. I'm not certain if, based on the law and the Department of Revenue's website, EITC-eligible households that would be fully phased out are still eligible for the minimum benefit.

Consider a single adult with no children. The law states:

(i) For eligible persons with no qualifying children, beginning at $2,500 of income below the federal phase-out income for the prior federal tax year, by 18 percent per additional dollar of income until the minimum credit amount as specified in (c) of this subsection is reached.

The phase-out income appears to refer to the income at which the EITC is fully phased out, which is $16,480. So it starts phasing out at $16,480 - $2,500 = $13,980. If their income is $15,500, their pre-minimum WFTC would be the $300 maximum credit minus 18% of (15500 - 13980) = $300 - 18% * $1,520 = $300 - $273.60 = $26.40. Per this section, they would get $50.

(c) If the refund for an eligible person as calculated in this section is greater than or equal to one cent, but less than $50, the refund amount is $50.

And we show them getting $50 (from the docs):

But what if their income is $16,000? They are still eligible for the EITC but the benefit is fully phased out (0.18 * (16000-13980) = 363.60 > 300). The until the minimum credit amount as specified in (c) of this subsection is reached suggests they might still be eligible for the minimum benefit, but why would (c) say greater than or equal to one cent, but less than $50 if the true criterion for receiving the minimum benefit is being an eligible household?

The DOR website also suggests that they'd still be eligible for the minimum benefit until the EITC thresholds (which are what the second and third columns represent):

The maximum credit amount ranges from $300 to $1,200 depending on the number of qualifying children (see table below). These amounts are then reduced based on income thresholds, similar to the federal program. The minimum credit amount is $50, regardless of the number of qualifying children.

I'm going to call the DOR to request clarification this morning.

[MaxGhenis]

I just spoke with Rosemary Garcia at DOR, who thought these cases would still be eligible for the minimum benefit, but wasn't sure and will have a policy person contact me to confirm.

[MaxGhenis]

Andy Van Gerpen from DOR just replied:

This is a good question.  The original legislation created some scenarios where the credit was phased out prior to the individual meeting the maximum income amount.  This was legislative fixed in the 2022 legislative session with HB 1888.

 

HB 1888 modifies the WFTC by requiring the department to annually adjust the WFTC percentage reduction rate to align the WFTC maximum qualifying income with the maximum federal adjusted gross income limit for the federal Earned Income Tax Credit (EITC).

 

The department is finalizing what those adjusted percentages will be for tax year 2022 (applications in 2023).  However, based on some quick math I think they will be something like:

 

Qualifying Children	Percentage
0	12%
1	12%
2	18%
3+	24%

I hope this helps. Feel free to reach out later this month or in early September and I can pass along the final percentages.

[MaxGhenis]

I replied:

Thanks Andy. We'll update our logic to calculate the phase-out rate as the benefit divided by the phase-out start (below EITC max AGI), which as you noted is
0 children: $300 / $2,500 = 12%
1 child: $600 / $5,000 = 12%
2 children: $900 / $5,000 = 18%
3 children: $1,200 / $5,000 = 24%

[MaxGhenis]

Andy replied:

The phase out rates calculations were done fairly quickly by me. These rates have not been finalized by our more seasoned research analysts. I think the calculations you demonstrated below are accurate, but it possible we are missing a statutory nuance. I recommend checking back the end of August or first part of September for finalized rates.