Do you know what the Working Families Tax Credit (WFTC) is? It’s likely you don’t, but you definitely should.
The WFTC is basically the state-level equivalent of the Earned Income Tax Credit (EITC), an extremely effective policy known for lifting low-income families out of poverty. Created in 1975 under President Ford, the EITC “will lower the amount of tax owed to the federal government for the prior year or it will result in receiving a check (‘refund”) from the government. If you qualify, you will either owe less in taxes or you may get cash back from the government.” (SOURCE: SHARE New Mexico)
The last increase to the WFTC in New Mexico was in 2008 when it went from 8% to 10% of the federal Earned Income Tax Credit. Here’s how the Legislative Fianance Committee explains the WFTC and EITC (so many acronyms!):
The state-level WFTC is based on the federal Earned Income Tax Credit for low-income working families. The EITC offsets some or all of those families’ federal income taxes and in many cases provides a supplemental source of income to help offset other taxes, including sales and payroll taxes. Since enactment in 1975, Congress has expanded the federal EITC several times. In tax year 2012, the EITC provided $63 billion in reduced or eliminated tax liability and cash refunds to more than 27 million low-income workers and their families, with an average EITC amount of $2,300.
Now, a freshman legislator in the NM House wants to increase the tax credit again.
Rep. Stephanie Maez has introduced a bill — HB 293 — to increase the WFTC to 15% from its current rate of 10%, phased in over two years. Rep. Maez’s bill is being heard today in the House Ways and Means Committee. (Sen. Jacob Candelaria is also carrying an identical bill in the Senate, SB 261.)
We’ll keep you updated on the progress of Rep. Maez’s effort to put more money back in the pockets of New Mexico’s working families (the ones who need it most).
Oh, and if you’re wondering where Republican members of the House and Senate may side on issues of tax fairness like this, look no further than Rep, James Strickler’s HB 279. The title tells you all you need to know: “Reduce Corporate Income Tax Rate”. Because those taxpayers with incomes over $500,000 a year are really in dire straights and need all the help they can get.
Here’s some more great information from SHARE New Mexico on the WFTC:
If you live in New Mexico and you claim the federal Earned Income Tax Credit, you can also claim the New Mexico Working Families Tax Credit. The Working Families Tax Credit for New Mexico residents equals 10% of the federal EITC amount. The New Mexico state tax credit is 10% over and above the EIC that you get from the federal government.
Example: If you live in New Mexico and you claim a $1,000 Earned Income Credit on your federal tax return, you can claim an additional 10% of this amount, equal to $100 ($1,000 x .10 = $100), on your New Mexico state income tax return.