New Analysis Confirms EITC’s Status As Proven Economic Stimulus
Governor Newsom and Legislature Are Short-Sighted in Cutting Education and Outreach Grants
SAN FRANCISCO, CA – An analysis for a new report issued by Golden State Opportunity, Our Fair Share: The Earned Income Tax Credit’s Crucial Role During a Recession, confirms that the Earned Income Tax Credit (EITC) is an economic driver, creating and sustaining tens of thousands of California jobs in 2019 and adding millions of dollars in taxes to the state General Fund.
“As policymakers focus on how to create a more just and equitable economy, this new analysis shows that recommitting to the EITC makes sense. Giving back to low-income working Californians money they’ve already earned combats poverty and improves well-being,” says Golden State Opportunity President Amy Everitt. “This week’s actions for racial justice, combined with the COVID-19 pandemic, show that we can’t ignore those inequities anymore.”
In 2019, more than 2.6 million Californian households claimed $6.3 billion from the federal EITC and more than 2 million households accessed $395 million from the California EITC. The combined impact created or sustained 74,000 jobs, which is equivalent to nearly 25% of the 310,300 total new jobs California created in 2019. The tax credits were also responsible for $14 billion in total economic activity – the ripple effect of money as it works its way through the economy – nearly two times the amount of EITC dollars claimed by low-income workers in the state.
The analysis also found that state and federal EITC refunds were responsible for $219 million in tax revenue collected by California’s General Fund.
Education and Outreach Are Critical to EITC’s Success
California has invested in education, outreach and free tax preparation in the four years since the state EITC began. In 2019, Californians claimed $400 million more in federal EITC dollars than they did in 2015, showing that education and outreach programs work. And if funds for outreach and education are not maintained, California will continue getting less than its fair share of federal EITC dollars.
It simply doesn’t make sense that Governor Newsom has eliminated the $10 million in grants for these programs in his proposed budget.
“Outreach to all current and newly CalEITC eligible workers who are struggling with financial insecurity is more critical than ever,” says Everitt. “Millions of middle-class Californians have lost their jobs and will now be eligible for the EITC refund, but most don’t even know this money will be there for them.”
Were California workers to claim less money in EITC refunds, the ripple effect on the state’s economy would be noticeable. There would be less job growth, lower earnings, and decreased revenue for the state’s General Fund.
The Legislature must return the $10 million in outreach and education grant funding to the state budget as an investment in California families.