SENATE BILL REPORT

SB 5709

BYSenator Rinehart

Providing for sales tax refunds for low-income households.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 26, 1987

Senate Staff:Stephen Rose (786-7443)

AS OF FEBRUARY 26, 1987

BACKGROUND:

The Washington tax system is regressive--taxes collected as a percentage of income is higher for lower income households than higher income households.  In recent years, federal non-elderly transfer payments have declined by 30 percent in inflation adjusted dollars, while the minimum wage has remained at $3.35 per hour, even though prices have risen by 20 percent.

Approximately 19 percent of the population live in households below 125 percent of the poverty line ($13,750 for a family of four); they control only four percent of total purchasing power.  Twenty-seven percent of all children reside in these low-income households.

SUMMARY:

All households with incomes less than 125 percent of the poverty line are eligible for sales tax refunds (only the state portion).  The refund is set at 2.4 percent of total household income, no receipts are required.

Refunds are distributed in two different ways.  For Department of Social and Health Services recipients, a supplemental grant of 2.4 percent is added to their current grants.  Other eligible people apply for lump sum refunds for the prior year to the Department of Community Development or an agent of the Department.  The Department currently contracts with community action programs to receive applicants for Low Income Home Energy Assistance Program (LIHEAP).  The sales tax refund eligibility criteria are identical to those required for LIHEAP grants.

Earned refunds begin on January 1, 1988; DSHS recipient grants increase immediately.  Other refunds will be issued in 1989.

Fiscal Note:      requested