By: Phil Ting and Joseph Sanberg
California’s economy ranks among the largest in the world. Yet, millions here struggle while living in or near poverty. In order to help those in need we created our own earned income tax credit, or CalEITC, that can augment the incomes of working families by as much as several thousand dollars each year.
CalEITC is modeled after the federal earned income tax credit, which is among the most efficient and effective poverty-fighting tools available. With Washington pushing to undermine basic services to the poor, we need to help more families rise from poverty by expanding who can claim CalEITC.
Working Californians should be able to put food on the table and provide stable housing for their families. Increasingly, this is not the case. In the Bay Area, despite the flourishing innovation economy — leading the nation in job growth and income for highly skilled workers — many are barely getting by. In fact, the percentage of children in San Francisco living in poverty — 21.9 percent — is higher than that in Kings, San Joaquin and San Bernardino counties.
When families live paycheck to paycheck they struggle to build and focus on a future. More than 800,000 people in our region live in poverty. Most cannot afford a $500 financial shock, making the cushion of a modest boost in income life-changing.
In 2015, CalEITC debuted to help California fight poverty. More than 385,000 Californians received the new credit, resulting in more than $200 million in refunds — extra money to pay for necessities like housing, transportation and clothing, and to get out from the cycle of mounting bills. This achievement is laudable, but we can do more.
Eligibility for CalEITC is far too restrictive. Parents with two children cannot qualify if they earn more than $14,000 per year. In other words, we are ignoring a lot of unmet need among working families who need a boost. Nearly half of California’s children live in or near poverty, and over 80 percent of these children are in families with at least one working parent.
We have a chance to take a more aggressive stance in fighting poverty by expanding CalEITC through Assembly Bill 1010, which enables full-time minimum-wage workers to claim the credit. The bill also modifies the program so that the self-employed may apply. Excluding this growing workforce hurts California’s independent contractors, including the gig-economy workforce, and entrepreneurs struggling to make ends meet.
Altogether, this legislation would benefit over 3 million Californians, giving low-income working families a better chance to escape the grip of poverty. In the program’s first year, more than 9 in 10 CalEITC dollars went to families with children, and families with multiple children received an average credit of more than $1,000.
The stakes are high, especially for African American and Latino families that disproportionately live in poverty. Greater participation in CalEITC translates into more families also benefiting from the federal EITC, of which $1.8 billion is left unclaimed by eligible Californians each year. That translates into an average benefit of over $2,200 on top of CalEITC. Access to these resources helps children perform better in school, have improved health and become less likely to remain in poverty as adults.
The Bay Area prides itself on being an inclusive region. Without greater support for the growing number of working families struggling on the margins, our communities will pay the price. We will lose diversity among our residents forced to relocate to more affordable areas and our economic prospects will dim. Though we will continue to need all kinds of workers — not just those on the top rungs of the income scale — we risk not having enough of all.