Governor Gavin Newsom has a chance to supercharge upward mobility for all working families in California, by ensuring that low-income taxpayers who file with an Individual Taxpayer Identification Number (ITIN) are also included in his bold vision for California and the Earned Income Tax Credit (CalEITC).
One in three families in California struggle to meet basic living costs, about twice the official poverty rate, and these are overwhelmingly working families: 9 in 10 of them are led by a working adult, according to United Way’s Real Cost Measure research. Why then wouldn’t the state continue to do whatever it can to help raise more people out of poverty?
Working men and women filing taxes with ITINs are doing everything right — they work, pay taxes and file tax returns. Yet, under current rules, if even one parent in the household files their taxes using an ITIN, then the entire household is excluded from the CalEITC, even if their children are American citizens. Immigrant workers produce around one third of the state’s Gross Domestic Product and pay billions of dollars in payroll and income taxes — yet their contributions do not yield an equitable return. In California, children in working immigrant families are more than twice as likely to live in poverty as other children in other working families. Excluding ITIN filers from the CalEITC and the Governor’s proposed expansion, would mean denying its proven poverty-fighting impact to as many as almost 300,000 children according to estimates by California Budget & Policy Center.
The federal government’s Earned Income Tax Credit (EITC) is a long-running refundable tax credit targeted at low- to middle-income working households. Researchers cite the federal EITC as among the most effective tools for reducing poverty across the nation. Although widely thought of as a success, the federal EITC does not reach all low-income workers. In response to a continued need to support the working poor, the California Legislature in 2015 enacted CalEITC which provides a tax credit to working adult households. This credit has been significantly expanded since, to include people making incomes up to $24,950 per year and by allowing eligible families with children to receive a credit of up to $2,879. The CalEITC helps mitigate California’s high cost of living for people who live in poverty.
We believe that all working Californians who pay taxes should have access to the CalEITC. Both the Senate and Assembly agree, thankfully, as they both include ITIN filers as eligible for the CalEITC in their budgets. The Assembly has also passed AB 1593 by Assemblymember Reyes that will expand eligibility to make ITIN filers eligible for this important credit.
Sadly, Governor Gavin Newsom’s 2019–2020 budget proposal, which significantly expands CalEITC, with special emphasis on support for young children, excludes hundreds of thousands of children living in hard-working families with ITIN filers. Now that the Assembly and Senate Budget committees have agreed to extend the credit to ITIN filers, we hope the Governor will also agree to include ITIN filers as a budget is finalized.
California’s leaders have repeatedly stood up against anti-immigrant rhetoric and policies. Improving the eligibility rules for the CalEITC would provide greater financial security to low-income working immigrant families who pay taxes and contribute to our state’s economy, and it would help tackle income inequality to ensure that California’s economy works for every Californian.
In his inaugural address, Governor Newsom boldly declared “We will not have one house for the rich and one for the poor, or one for the native-born and one for the rest. We will build one house for one California.” We agree, and so we urge the governor to grant hundreds of thousands of low-income children and their families access to the CalEITC.
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Co-authored by Peter Manzo, President & CEO, United Ways of California, (https://www.unitedwaysca.org) and Paulina Gonzalez, Executive Director, Community Reinvestment Coalition (http://calreinvest.org).