California Earned Income Tax Credit (CalEITC)
The CalEITC is a refundable state tax credit that increases the economic security of working families. The credit is currently available to households with annual earnings below $16,750 for an adult without qualifying children and $24,950 for a family with one or more qualifying children. In its first year, more than 815,000 people benefited from the credit. Since then, the state budget has increased its investment in the credit to $1 billion, which will see the number of people receiving the credit rise to nearly 3 million.
The CalEITC primarily benefits working families with children, who can receive as much as $2,870 in addition to the boost they receive from the federal EITC.
In 2018, over 1.9 million tax credits were issued, totaling more than $350 million. The CalEITC is making a meaningful impact on families in deep poverty: many families used the credit to pay for food, rent, childcare, and other basic needs, or one-time expenses such as a car repair to enable them to get to work.
The CalEITC reduces deep poverty by building on the federal EITC, which is the nation's largest and most successful anti-poverty program. According to the Franchise Tax Board, the CalEITC lifts 23,000 California families out of deep poverty. Additionally, the CalEITC improves child and maternal health outcomes, increases education success through higher test scores, graduation rates, and college attendance rates, spurs local economic growth and builds long-term economic security.
Building on the success of the credit in its first year, the CalEITC should be strengthened and expanded to maximize its success as a poverty-fighting tool, work incentive, and driver of economic activity.
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Invest in CalEITC outreach and free tax preparation services
Promoting the CalEITC is critical to its success. The CalEITC targets very poor households, a hard to reach population who are struggling to make ends meet every day and are mostly not required to file state taxes unless they want to claim their credit. A survey conducted by the California Budget and Policy Center found that fewer than 1 in 5 people who were likely eligible for the CalEITC had even heard of the credit. The Franchise Tax Board acknowledged that households will churn on and off the income eligibility threshold for CalEITC, thereby making ongoing outreach efforts particularly important. Efforts to raise awareness of the CalEITC are critical to ensuring as many eligible families as possible benefit from the credit. Promoting the state EITC also provides a great opportunity to increase participation in the federal EITC, which would draw millions of dollars into the state, help low-income working families better support themselves, and boost local economies.
California should fund robust outreach and increased capacity in free tax-preparation services throughout the state by continuing the CalEITC Education and Outreach Grant Program administered by the Department of Community Services and Development at a funding level of $9 million to ensure outreach resources are sufficient to meet the needs and that free tax prep assistance is there for those who want to access it.
Expand CalEITC to include ITINs Filers
California's Earned Income Tax Credit (CalEITC) has significantly improved the economic security for millions of low-income individuals and families. Studies show that the credit not only helps families meet basic needs but it also improves children's future prospects. Unfortunately, thousands of families cannot receive the benefits of the credit.
Workers that file their taxes with Individual Taxpayer Identification Numbers (ITINs) do so because they do not have a Social Security number, regardless of immigration status. These workers are excluded from receiving the CalEITC, thereby also excluding tens of thousands of children. To make matters worse, ITINs filers will no longer be eligible for the federal Child Tax Credit making it even harder for families to stay afloat.
Expanding the CalEITC to include ITINs filers will help California continue the fight against poverty. We know the credit works and expanding it will allow us to expand the positive outcomes that come with it, thus helping ensure that ALL working Californians have the tools they need to succeed.
Expand the Federal Earned Income Tax Credit (EITC) and Child Tax Credit (CTC)
Millions of working American families are struggling to stay afloat as the costs of living continue to rise while their income fails to keep up. The Working Families Tax Relief Act is a new federal proposal that would help low-income workers support themselves and their families.
It would increase the Earned Income Tax Credit (EITC) by 25% for families with children. For workers not raising dependent children, their maximum credit would increase from $530 to $2,070. Additionally, the proposal would also make the $2,000 Child Tax Credit (CTC) fully refundable and create a $3,000 Young Child Tax Credit that would add $1,000 to a family's CTC and would also be fully refundable.
In total, this new proposal would help raise incomes of 46 million households, nearly 114 million people, including 11 million children. The Working Family Tax Relief Act would help put more money back in the pockets of the working-class people
For more information on how working families would be affected: The Working Families Tax Relief Act: Raising Incomes of 46 Million Households
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