EITC Outreach and Local Asset Building Coalitions
Since 2006, Washington State has invested in the creation of an innovative asset building infrastructure through the support of local asset building coalitions. This infrastructure is unique in the nation and, like all good investments, has generated high returns to the State.
- The 2010 State budget preserved $438,000 for fiscal year 2010 and $438,000 for fiscal year 2011 in support of local asset building coalitions’ work, including EITC outreach campaigns.
- Between the 2006 and 2009 tax years, local asset building coalition campaigns prepared over 56,000 tax returns at free tax preparation sites, bringing an additional $80.2 million in federal funds to the State through tax credits. This is an increase of 54% in credits generated since 2005.
- Millions of Earned Income Tax Credits (EITC), a refundable federal income tax credit for low to moderate-income people, goes unclaimed each year in Washington State.
WABC Position: Preserve funding for local asset building coalitions to conduct EITC outreach campaigns and other asset building activities.
Individual Development Accounts
In order to become financially resilient, people with low incomes must have the opportunity to save money and build wealth. Washington State’s Individual Development Accounts (IDAs) are matched savings accounts for people with lower incomes that help them save for homes, small businesses, and other assets. Participants receive financial education to help them budget, save, and become informed consumers. Successful IDA outcomes are guaranteed because state funds that are matched with individual savings are only expended when the asset is actually purchased.
State IDA funds have leveraged over $1.8 million in federal and private funds that contribute to accounts.
- A recent study found a zero percent foreclosure rate among King County homeowners who participated in an IDA program which provided extensive financial education and matched savings on their down payments.
- Federal funding for IDAs is currently available, but these funds require a state or local match for each federal dollar. Without state funding, successful IDA programs statewide are being discontinued.
WABC Position: Dedicate $1 million to Individual Development Accounts.
Over 30,000 families in Washington lost their homes to foreclosure last year— an increase of 70%. This year, another 41,000 families may face foreclosures. Lenders, borrowers, homeowners, and communities all benefit if foreclosures are avoided. Legislation would seek a foreclosure mediation process for Washington State in order to give homeowners the opportunity to avoid foreclosure and maximize the ability for loan modifications to keep homeowners in their homes.
- It is reasonable for homeowners to request a face-to-face conversation to see if an alternative to foreclosure is available before losing a financial and social asset as great as a home.
- Twenty-three jurisdictions (states and municipalities) have mediation processes to seek foreclosure alternatives. Data show that 60 percent of participants avoid losing their homes.
- Ensure an open foreclosure process by requiring calculations used to determine loan modification eligibility be provided to the borrower.
WABC Position: Support a mediation process to seek alternatives to foreclosure.
Allow Financial Institutions to Reward Savings
Prize-linked savings is a proven strategy which promotes a culture of savings and links households to mainstream financial institutions with safe and affordable products and services. Financial institutions in Washington State are interested in sponsoring prize-linked savings programs, but state law would need to be clarified to specifically allow for them to do so.
- Prize-linked savings programs allow financial institutions to provide incentives for savings through financial institution-sponsored raffles. Although not all participants win prizes from the raffle, all participants come out ahead with increased personal savings.
- A 2009 pilot in Michigan attracted 11,500 participants, including low and moderate income earners, to save over $8.5 million. Over half of the participants had not saved regularly before opening their accounts.
- Over one-third of adults nationwide reported having no savings.
- Prize-linked savings has the potential to decrease the number of unbanked and underbanked household in Washington as well as increase overall savings rates, all at no cost to the State.
WABC Position: Amend statute to allow for savings promotion raffles at financial institutions to incentivize opening accounts and saving money.
Working Families Tax Rebate
Families with lower incomes in Washington State pay a larger share of their income toward state and local taxes than low income households in any other state. In 2008, the Washington State Legislature created the Working Families Rebate (WFTR) in an effort to create a more equitable tax structure.
- WFTR would provide an estimated 350,000 eligible families with a sales tax rebate equal to 10% of the federal Earned Income Tax Credit (EITC).
- The State has already invested $1.2 million for the Department of Revenue to create an efficient delivery system for the rebate.
- The final step required is to fully fund the rebate so that, beginning in 2012, working families can start shouldering a proportionate share of taxes.
WABC Position: Fully fund the sales tax rebate for low income families giving them the equivalent of 10% of federal EITC.
For additional information, contact Rebeca Potasnik, Executive Director of WABC at email@example.com, 360/977-0476 or either of WABC’s Policy Committee Co-Chairs—Karan Gill, firstname.lastname@example.org,
206/527-3886 and Kate Baber, 206/694-6794, email@example.com .