Strengthening and Modernizing the California EITC to Fight Poverty, Inequality, and the Rising Cost of Living

The steep and rising cost of living and housing, coupled with stagnating incomes, means too many families in California aren’t feeling the prosperous economy. Many people live on the financial brink, as the cost of middle-class life has dramatically increased—from housing to childcare to medical costs—while wages lag behind.

At the same time, income inequality is at a peak, and is worse in California than in most other states:  CA claims both the greatest number of billionaires and the highest poverty rate in the nation. This dramatic disparity is on display in every corner of our state, and our current tax system exacerbates both of these problems -- many low-income people pay more of their income in state and local taxes than most other taxpayers, according to Institute for Taxation and Economic Policy data.

As a simple and effective approach to fight rising economic inequality and financial instability, we need to put more money back in the pockets of the working and middle-class people who need it most. California should do this by modernizing and expanding the CalEITC with a Cost-of-Living Refund.

We’ve worked for years alongside partners on how we might modernize and expand the state’s Earned Income Tax Credit to do just that:  put money back into the pockets of Californians. The policy details are in a white paper that we’re releasing today.

The white paper, “Strengthening and Modernizing the California EITC to Fight Poverty, Inequality, and the Rising Cost of Living,” lays out a vision and sets a clear course for achieving a more affordable and accessible California. We could build upon the existing CalEITC with these modernizations:

  • Expand the current CalEITC to reach further up the income scale to help Californians who are working while struggling to keep up with the state's rising cost of living;

  • Expand the definition of work by including unpaid family caregivers and students; and

  • Create an option to receive the benefit monthly so people feel it working in their lives.

California’s affordability challenge is formidable. It will take bold action and a sustained commitment over time to create a California where all can thrive. In the coming weeks the new Governor and state lawmakers will be determining their priorities for the year.

We believe an affordability agenda must be a top priority, and the new Governor and state leaders are poised to lead on policy to benefit millions of hard-working Californians by expanding and modernizing the CalEITC to become the most ambitious in the nation.

Lead the way, California.