Cal EITC claims surpass 2 million, returning record $381 million to low-income workers

THE NUMBER OF HOUSEHOLDS RECEIVING THIS CASH CREDIT INCREASED 5x IN 4 YEARS

SACRAMENTO, CA — Newly released figures from the Franchise Tax Board show that more than 2 million workers claimed $381 million from the California Earned Income Tax Credit (Cal EITC) through the first eight months of 2019. That’s a 40% increase in the number of claims over the same period last year.

“California has achieved tremendous progress in the fight to make work pay better through the Cal EITC. I was proud to stand with a broad coalition of advocates to push for the creation of this important credit in 2015. Since then, the number of low-income households benefiting from the Cal EITC has increased by more than five times,” said Joe Sanberg, founder of Golden State Opportunity, “While this is great news, there is no doubt our mission to end poverty and create financial security for all Californians is still far from a full reality, and there is more work to do.”

Recent census figures show that, while California is the 5th largest economy in the world, more than 7 million of its residents live in poverty when factoring in the cost of living — among the highest poverty rates in the US — and that incomes for all but the highest earners remained flat in 2018.

While these figures are a sobering reminder of the growing inequality in California, the continued success of the Cal EITC offers a promising path forward. Gov. Gavin Newsom and the Legislature doubled down on that success by increasing the Cal EITC to a $1 billion program for 2020 That massive expansion means low-income parents with young children will be eligible for an additional $1,000 credit, and workers making $30,000 or less will be able to claim the Cal EITC in 2020.

The EITC is a proven way to reduce poverty and improve quality of life for low-wage workers. Below is a collection of research showing the positive impacts of increasing EITC refunds:

• Addresses generational poverty: Children whose parents receive an EITC boost have better health, perform better in school, are more likely to attend college, and go on to have higher earnings as adults. https://calbudgetcenter.org/wp-content/uploads/Report-State-EITCs-Build-on-Success-of-Federal-EITC-03.09.2017.pdf

• Helps working parents, especially single-mothers, to get ahead: Women who receive a more generous EITC in their 20s and 30s go on to have higher earnings in their 40s than those who received a smaller credit or none at all. https://news.uci.edu/2018/01/09/earned-income-tax-credit-increases-womens-earnings-over-time-study-finds/

• Helps workers afford the high cost of housing: A larger EITC refund helps working parents move out of shared living situations with other adults, and move into a home where they are on the lease or mortgage. http://fordschool.umich.edu/news/2019/pilkauskas-finds-earned-income-tax-credit-helps-low-income-moms-live-their-own

• Reduces suicide: When people feel financially secure, they’re less likely to take their own lives. Research shows that a 10% increase in EITC corresponds to a 5.5% drop in suicide rates for less educated workers. https://www.nber.org/papers/w25787