This week brought important movement at both the state and federal level to pass a Cost-of-Living Refund to put more money back in the pockets of working and middle-class Americans.
At the federal level, Senator Sherrod Brown, along with Representatives Ro Khanna and Bonnie Watson Coleman, introduced a national Cost-of-Living Refund.
Initially conceived as a dramatic increase in the Earned Income Tax Credit (previously known as the GAIN Act), the new legislation takes the critical additional step of expanding the definition of work to include family caregivers and students – providing those Americans working each day to better themselves and their communities with a cash credit that recognizes the value of the meaningful contributions they provide to our society and economy.
Economic Security Project Action co-chair Chris Hughes said, "The Cost-of-Living Refund bills will powerfully boost the incomes of hard-working American families. These direct cash policies are one of the most powerful -- and by far the most direct -- weapon to fight economic injustice. We applaud Senator Brown, Congressman Khanna and Congresswoman Watson Coleman for their continued leadership in the fight for economic security for American families.
“This Cost-of-Living Refund also includes a big idea that is long overdue: providing support to all those who are working, including people who are studying to prepare for the workforce and those taking care of a young child or a sick or elderly family member. Broadening the definition of work is key and we’re pleased to see these bills embrace it.”
“All across the country, hard work isn’t paying off like it should. Corporate profits have soared, executive compensation has exploded, but wages are flat. Meanwhile the cost of everything from healthcare to education and housing is up. We need to put more money back in the pockets of working people and that’s what this bill does,” said Senator Brown.
We also saw progress at the state level with Governor Gavin Newsom including a version of the policy in his inaugural State of the State address, saying, “We will provide a Cost-of-Living Refund by expanding the earned income tax credit to a million more Californians who need it the most.”
The governor’s Cost-of-Living Refund proposal expands and modernizes the already-successful CalEITC in the following significant ways:
It allows for recipients to have their credit paid out monthly, rather than as an annual lump sum, making the credit more useful in the normal course of daily life, since bills don’t come once a year.
It provides a $500 boost for families with children under age six that kicks in at only $1 of earnings – targeting support to the most vulnerable residents: very young children in very low-income households.
It extends eligibility for the credit all the way up to $30,000 — essentially eliminating the chasm between the cut-off for many benefits and full-time minimum wage income.
The proposal sets a bold course in recognizing the power of putting cash back in the pockets of millions of Californians who work hard and yet struggle to afford the basics in an increasingly expensive state.
While this plan is a big first step, to realize the promise of a full Cost-of-Living Refund, a few additional provisions are important:
1. Expanding eligibility to ALL tax filers. Currently, only taxpayers with Social Security numbers are eligible for the credit, excluding hundreds of thousands of Californians who pay taxes with an Individual Taxpayer Identification Number (ITIN). Everyone who pays taxes should be eligible.
2. Expanding eligibility for the credit to all unpaid caregivers of young children and of elderly or disabled family members. As the governor noted in his State of the State with his own personal experience with his father, the “graying” of California will mean more and more seniors in need of care, many of them relying on family members to bear both the personal and economic cost of providing that care.
3. Increasing participation by implementing auto-filing. Along with monthly payments, this modernization just makes sense — and California’s successful (albeit short-lived) Ready Return program shows that it can be done. Drawing on earnings information California’s agencies already have, the state should send pre-populated forms to those likely eligible for the credit instead. This “nudge” would help ensure that everyone who has earned the credit actually receives it.
The policy sets a bold course in recognizing the power of cash. It is an essential first step in putting money back in the pockets of millions of Californians who work hard and yet struggle to afford the basics in an increasingly expensive state.
These two proposals are the beginning of a movement that’s fast gaining traction among leaders and advocates across the country to help families who have struggled with the rising costs of living and housing for far too long. We will continue to work with our partners at all levels of government over the coming months to ensure that working and middle-class Americans have the ability to provide for their families and take part in the American Dream.