California moves toward economic justice with cash

Teri Olle
Teri Olle
Jan 8, 2021 · 3 min read

This was a week of political whiplash, to say the least. Lost in the horror of Wednesday was a moment to celebrate in California. Before the events unfolded in our nation’s capital, advocates gathered on zoom to hear California’s Governor Newsom unveil a groundbreaking proposal to send low-income Californians cash to help survive the devastating economic crisis stemming from COVID-19.

Flanked by Assembly and Senate leaders, the governor announced a $2.4 billion budget proposal to send $600 rapid relief direct checks for any household earning under $30,000 a year — the income that qualifies for California’s state Earned Income Tax Credit (CalEITC). If passed as a mid-year budget adjustment, the state can expedite implementation and get these checks out as soon as next month. Even better, the checks will be sent automatically to any household that claimed a state CalEITC last year — no need to file or claim to receive the boost. Households that are eligible based on 2020 income — including newly eligible undocumented immigrants who file with an Individual Tax Identification Number (ITIN) — can claim the credit as part of their 2020 tax filing.

The proposal is a feather in the cap for the Newsom administration, builds upon a drumbeat of cash expansion carried out over the last two years, and cements the legacy of Newsom’s outgoing chief of staff, Ann O’Leary, who spearheaded and successfully achieved a massive expansion of the CalEITC during her tenure (which ends today).

Governor Newsom has been a stalwart proponent of EITC since his days as San Francisco’s mayor, when he initiated a local Working Families Credit — a $250 boost for households filing for the federal EITC. Fast forward to 2019, when, spurred and informed by the policy expertise of Ann O’Leary — who famously said she would only take the intense Chief of Staff job if the governor agreed to expand paid leave — the governor made his first big move to dramatically expand direct cash support to low-income people. A key element in the governor’s first budget proposed to triple the existing CalEITC program — to over a billion dollars — chiefly by raising the income eligibility up to California’s minimum wage, and by creating a new Young Child Tax Credit (YCTC) of $1,000 for households with young children. This credit recognized the additional expense of preschool-age children, and, with eligibility starting at the first $1 of earnings, it also recognized the challenges family caregivers (usually mothers) face in maintaining sufficient earnings while caring for young children. These 2019 expansions extended the EITC/YCTC to over 2 million additional households.

But there was unfinished business: the exclusion of workers who file taxes with an ITIN. Despite paying taxes, the disparate treatment of immigrant workers would continue — and worsen in 2020 in the wake of the COVID-19 economic crisis, as immigrants were ineligible for any federally funded relief. In light of this unconscionable treatment, California finally remedied this inequality, and ITIN filers became eligible for CalEITC for the 2020 tax year.

Which brings us to this fateful week. There is more work to be done to support low-income workers in California, to be sure. For starters, we need to move toward full automation for everyone who appears eligible to receive these critical income-boosting credits; as the IRS recently demonstrated despite years of protestation, we can do hard things. Second, we need to make good on the governor’s commitment to making credits available as they are earned — and make available an advance periodic option to boost income year-round. Finally, we need to modernize what we call “work” to include the vital, but unpaid, contributions of family caregivers, and extend the credit to low-income students to support economic mobility. So our work continues, and there’s much more to be done to truly create an economy that works for everyone. And even though this story might not make the headlines of a week like no other, let’s take a minute to applaud the bold strokes of California vision and leadership of the Governor, his history-making chief of staff, Ann O’Leary, and the incredible coalition of groups who fight for low-income Californians every single day.

Economic Security Project

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