By Lauren Pescatore
Two years after enacting a state-level Earned Income Tax Credit (EITC), the California legislature today passed an expanded credit that will help more low-wage workers make ends meet. The bill now heads to the governor for his signature.
As part of the state’s 2018 budget, the California legislature and Governor Jerry Brown (D) have agreed to expand the EITC to include self-employed, or “independent” workers, increase the income eligibility threshold to $22,300 and provide $2 million in funding for nonprofits involved in EITC outreach and awareness efforts. CalEITC4Me estimates that two million families could benefit from these expansions.
California’s EITC was originally enacted at 85 percent of the federal credit, but only for those earning up to about $14,000, meaning only a portion of workers eligible for the federal credit could benefit. In addition, those earning income only through self-employment were excluded from the credit. Low-wage independent workers, according to a growing body of research, are particularly vulnerable because they are often excluded from key components of the safety net offered to the traditional workforce.
Expanding the state EITC to include these workers, increasing the credit’s income eligibility threshold and bolstering outreach efforts will help to ensure more low-wage Californians see their taxes reduced.