California will provide additional cash benefits to low-income residents battered by the pandemic — including working poor families, children and parents on welfare and undocumented immigrants who are elderly, blind or disabled.
On Wednesday, Gov. Gavin Newsom (D) announced a deal with top state legislators that will send one-time stimulus payments of $600 and $1,200 to millions of Californians in the coming weeks, residents who “have borne the disproportionate economic burden of the COVID-19 recession.”
Nearly a year into the pandemic, “people are hungry and hurting,” Senate President pro Tem Toni Atkins announced in a press statement.
Modeled on President Joe Biden‘s American Rescue Plan, the stimulus plan announced Wednesday will deliver a one-time $600 check to an estimated 5.7 million Californians who received earned income tax credit payments in 2020, at a cost of $2.3 billion. Another $600 stimulus will be provided to residents who made less than $75,000 last year.
The new state budget allocation expands on prior anti-poverty efforts in the state that focus on benefits for low-income tax filers. California leaders have nearly tripled the budget for the California earned income tax credit program, known as CalEITC — a dramatic expansion in one of the nation’s least affordable states.
Last year, more than 2 million people claimed the state credit. And under the revised rules, an estimated 600,000 more Californians will be eligible when they file their 2020 taxes.
Christopher Sanchez, policy advocate with the Sacramento-based Western Center on Law and Poverty, said the CalEITC expansion is crucial at a time when families are struggling like never before to meet basic needs.
“Even prior to the pandemic, families have been living paycheck to paycheck, and many were on the verge of going homeless,” Sanchez said. “Working families are being recognized, and the government is stepping up and stepping in to really assist them.”
This year’s state budget allotted $1.1 billion to the CalEITC program, up from the previous $400 million. The program’s bigger budget means greater accessibility, including raising the qualifying income to $30,000 for an individual filer, and including the state’s youngest workers, ages 18 to 24. In prior years, eligibility began at 25.
Additionally, a new young child tax credit provides up to $1,000 to qualifying filers who have at least one child under 6 years old. The credit is applied with the first dollar a parent makes.
Advocates for the poor laud the tax credits.
“The EITC is the program that moves the most children out of poverty in California,” said Caroline Danielson, a policy director and senior fellow at the nonpartisan Public Policy Institute of California. “That’s the immediate benefit.”
Combined with the federal credit, CalEITC — a 6-year-old program modeled after the federal earned income tax credit — can put thousands of dollars back into the pockets of California’s poorest working households.
Youth advocates are spreading the word to current and former foster youth and homeless young adults, encouraging them to file their taxes by April 15 through a free tax preparation service. The tax filings could also help vulnerable young people receive their federal and state stimulus checks if they haven’t already collected them.
A social media toolkit created by the San Francisco-based John Burton Advocates for Youth aims to reach as many of the 3.8 million “transition age” California youth as possible with messages on Twitter, Facebook and Instagram. Advocates are blasting messages stating: “Homeless youth who work can claim the CalEITC!” and “Paying for diapers got you down?” The messages are being spread through clinics, shelters and drop-in centers.
According to the California Poverty Measure report produced by the Public Policy Institute of California and the Stanford Center on Poverty and Inequality, more than a third of the state’s residents have lived at or near poverty in recent years — well before the devastating impact of COVID-19. Yet the combined effect of food stamps and the earned income and child tax credits kept almost 13% of children out of poverty. The federal and state tax credits alone, the researchers found, kept 3.6% California children out of poverty — or approximately 320,000 kids.
And a recent federally funded report by researchers at the University of Washington found the earned income tax credit has resulted in a significant drop in reported child maltreatment. The study found that over 14 years, a 10% increase in the benefit led to a 9% drop in the annual number of neglect reports referred to child welfare agencies.
The earned income tax credit originated in 1975 as a federal program, and 29 states offer their own versions, with the size of the tax credits varying according to income level and family size. In studying the effects of the tax credits, University of Washington researchers found the more generous the benefit, the larger the reduction in maltreatment reports, particularly those alleging child neglect.
In its first year, CalEITC boosted the income of about 385,000 families, who received almost $200 million. In 2019, more than 2 million people claimed the credit, receiving roughly $395 million.
The benefit also serves a group of workers who often fall through the federal social safety net: undocumented immigrants who don’t have social security numbers. Following a bill signed into law by the governor in September, those workers can use their individual taxpayer identification number to receive the earned income or young child tax credits. The state’s undocumented immigrant workers can receive the stimulus payments announced Wednesday as well.
California’s tax credit is “an important piece to the puzzle, but it’s not a cure-all,” cautioned Danielson, whose research focuses on social safety net programs.
An area where the EITC programs fall short, Danielson said, is that it only benefits those with earned income. California’s unemployment rate reached an all-time high of 16.4% last spring, according to the state’s Employment Development Department. Although it dropped to 9% by year’s end, unemployment is still more than double what it was in 2019.
“It tends to be a program that, in general, serves people better during good economic
times because there’s more jobs available,” she said. “If you don’t actually have earnings during a recession because you’ve lost your job, then you’re not eligible.”
Jeremy Loudenback contributed to this report.