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Originally published Friday, January 25, 2008 at 12:00 AM

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State Democrats consider sales-tax credit

State Democratic leaders are pushing a sales-tax break for low-income families that could put as much as $470 in their pockets next year...

Seattle Times Olympia bureau

OLYMPIA — State Democratic leaders are pushing a sales-tax break for low-income families that could put as much as $470 in their pockets next year.

Around 350,000 households in the state would be eligible for the proposed break, which calls for the state to provide a 10 percent match to people who qualify for the federal Earned Income Tax Credit.

"This is literally a tax cut for people who need it most," said Sen. Craig Pridemore, D-Vancouver, the lead sponsor of Senate Bill 6809.

The measure, introduced Thursday, quickly gained support among Democrats, even though by one estimate it could cost the state $120 million per biennium.

Democratic leaders have repeatedly vowed to be frugal this year and set aside at least $1 billion of a projected tax surplus in this year's budget as a buffer against recession.

House Speaker Frank Chopp, D-Seattle, said Thursday he hopes to pass the tax refund this session. "No question. I love this idea," he said.

However, Chopp said the souring economy could put a brake on the proposal. "We support the idea. We're just concerned on the budget side to make sure we ... can potentially afford it," he said.

Senate Majority Leader Lisa Brown, D-Spokane, also supports the proposal. "So far, everyone I talk to in my caucus is pretty excited about the concept," she said.

The prospect of a recession could actually give the legislation a political boost, Brown said, noting that it "ties in well with the concepts that are being spoken about in terms of stimulus at the federal level."

Congressional leaders announced a deal with the White House on Thursday on a package that would give most tax filers refunds of several hundred dollars beginning in May.

The families who'd get money from the proposed refund "would spend it very quickly," Brown said, "because they just have bills to pay."

However, Washington residents would not be able to apply for the credit until next year under the current bill because it's expected to take several months for the state to set up a system to handle the paperwork involved.

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Both Chopp and Brown said it's possible the legislation may be scaled back to make it more affordable to do this session.

The Earned Income Tax Credit is a refundable federal income-tax credit for low-income working people and families. The amount of money people would get back under the Senate bill would vary depending on income.

For example, a family of four with an income of up to $17,390 would get $470 back, according to the Washington State Budget and Policy Center, a think tank that is backing the measure.

The credit starts to phase out at an income of $35,000, depending on the size of the family, according to the center. Legislative staff have not studied the proposal yet.

Sen. Joe Zarelli, R-Ridgefield, the ranking Republican on the Senate Ways and Means Committee, opposes the approach. "I just think, from a policy perspective we're better off addressing what people are screaming about, and that's property taxes," he said.

Giving people a break on their property taxes is "consistent and across the board and we're not picking certain individuals we want to give a benefit to," he said.

Pridemore argues that the sales-tax break is a good idea.

"I've watched for years as we've done one tax-incentive program after another, generally for businesses and wealthier people. The idea of doing something for working people is very attractive to me," he said.

Doing it would not be very complicated, he said. "The state would get a list of all state residents who have been given the Earned Income Tax Credit. They'd then send a postcard to each of those people and say they have qualified for a state sales-tax credit. The people would send in an application and the state will send them a check," he said.

Andrew Garber: 360-943-9882 or agarber@seattletimes.com

Copyright © 2008 The Seattle Times Company

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