Background

The CalEITC is a refundable state tax credit that increases the economic security of working families. The credit is currently available to households with annual earnings below $6,717 for an adult without qualifying children, $10,087 for a family with one qualifying child or $14,161 for a family with two or more qualifying children. In its first year, more than 815,000 people benefited from the credit. The CalEITC primarily benefits working families with children, who can receive as much as $2,706 from the CalEITC, in addition to the income boost they receive from the federal EITC.

In 2016, families with children received an average of around $830 from the CalEITC. The CalEITC is making a meaningful impact on families in deep poverty: many families used the credit to pay for food, rent, childcare and other basic needs, or one-time expenses such as a car repair to enable them to get to work.

The CalEITC reduces deep poverty by building on the federal EITC, which is the nation's largest and most successful anti-poverty program. According to the Franchise Tax Board, the CalEITC lifts 23,000 California families out of deep poverty. Additionally, the CalEITC improves child and maternal health outcomes, increases education success through higher test scores, graduation rates and college attendance rates, spurs local economic growth and builds long-term economic security.

In the 2015-16, the Legislature's budget bill indicated their intent to expand the CalEITC "to include a broader section of working poor Californians." Building on the success of the credit in its first year, the CalEITC should be strengthened and expanded to maximize its success as a poverty-fighting tool, work incentive, and driver of economic activity.