Thanks in large part to the hard work and advocacy of partners like you, California took a big step last month to support working poor families. Lawmakers enacted a budget that significantly expands the California Earned Income Tax Credit (CalEITC), a refundable state tax credit that provides an income boost to working families struggling to make ends meet. More than one million additional families will benefit from the expansion, including low-income self-employed workers and families with a full-time minimum-wage earner.
The CalEITC, created in 2015, builds upon the success of the federal Earned Income Tax Credit created over 40 years ago, which is the most effective federal anti-poverty program. In 2015 alone, the federal EITC, along with the Child Tax Credit, lifted 9.8 million people including 5.1 million children out of poverty, and made millions more Americans less poor. California families with children can receive as much as $2,700 from the CalEITC, in addition to the income boost they receive from the federal EITC.
Under the expansion, self-employed workers – including independent contractors, gig economy workers and entrepreneurs – who were previously excluded from the credit will be able to benefit. In addition, families with children that have an annual income of less than about $22,300 will be eligible for the credit – which will enable a family with a full-time, minimum wage job to benefit. Previously, the credit was only available to families with annual earnings below $10,078 for a family with one child or $14,161 for a family with two or more children.
A broad coalition of organizations across the state led by Children’s Defense Fund-California and United Ways of California came together to push for expand the CalEITC including advocates for education, health, economic security, and racial justice, unions, small business groups, food banks, and pediatricians.