Fryday: Cal EITC expansion is bigger than $1 billion and it’s going to save lives
April 14, 2019 – New research suggests that next year, when low-income California workers will be eligible for a significantly larger tax refund, it will not only boost the economy and uplift poor families — it’s likely to save lives, too. Gov. Gavin Newsom and the Legislature passed a budget that more than doubles the California Earned Income Tax Credit (Cal EITC), a cashback credit for low-wage earners, making it a $1 billion program. The Cal EITC is one of the strongest tools we have to fight poverty.
In a paper published earlier this year, UC Berkeley scholars found a direct correlation between this tax credit and the mental health of those low-income workers who have earned it. The study found that “a 10 percent increase in the EITC reduces suicides among [workers without a college degree] by 5.5 percent.”
Here in Kern County, tragically there are more than 11 suicides annually for every 100,000 residents. This is slightly higher than the statewide rate, and the rates are highest in rural areas. Over time, the more that people feel financially secure, thanks to the increased tax credits they receive, the less likely they will be to succumb to hopelessness and taking their own lives.
The EITC was created to stimulate the economy by increasing the purchasing power of low-income workers, but it’s become one of our nation’s most effective anti-poverty tools, because the added income increases quality of life — especially for families with children who receive the largest credits.
Workers lacking a college education struggle mightily in our increasingly skill-based economy, where wages for unskilled labor have remained flat for decades, driving so-called “deaths of despair,” a term popularized by Princeton economists in an influential 2015 paper, which refers to suicide as well as drug and alcohol-related early mortality.
To test the impact of the EITC on deaths of despair, the researchers compared mortality data from the federal Centers for Disease Control and Prevention in states that had expanded their EITC between 1999 and 2015 before and after the policy changes took effect. What they found was that raising the EITC reduced suicides.
While the research confirms a connection, the link between an expanded Cal EITC and fewer suicides is intuitive. Boosting the incomes of people who work hard every day, but are still faced with wrenching decisions — such as whether to buy groceries or pay the light bill — can help alleviate a crushing sense of desperation that might otherwise drive someone to take their own life.
However, the impacts of California’s EITC expansion will go even deeper, helping to put a new generation of Californians on a brighter path. That’s because parents with children under age 6 will get an additional $1,000 on top of the existing credit. Studies show that children in families that receive a more generous EITC have better health outcomes, perform better in school, are more likely to attend college and have higher earnings as adults. Expanding the Cal EITC is a down payment toward ending the generational poverty that is exacerbating wealth inequality in our state and the nation.
Already this year, the Cal EITC returned $13.8 million to low-income workers in Kern County. Next year, with the expansion, that figure could be as high as $34.5 million.
At Golden State Opportunity, our CalEITC4Me campaign is laser-focused on ensuring that California households eligible for this credit are aware it’s available to them and they file a tax return to claim it. This work will take on even greater significance next year when an estimated one million families will be newly eligible for the credit.
In total, the state estimates that three million California households could claim the credit next year, meaning a total of seven million people — including millions of children — could benefit from higher income. We know that will only happen if, working with the state and our other community partners, we reach those workers and help them locate the resources to claim the Cal EITC.
We have the opportunity to meaningfully address income inequality, save lives, and give the next generation the opportunity to succeed. Let’s spread the word: a Cal EITC refund can improve and potentially save lives.
Josh Fryday is a Novato city councilman and president of Golden State Opportunity, a private nonprofit organization that has partnered with the state to encourage taxpayers to take advantage of the Earned Income Tax Credit.