This week, California and Maine became the first two states in the country to pass Cost-of-Living Refund legislation, bills that help more working families make ends meet by expanding and modernizing the Earned Income Tax Credit (EITC).

In California, the expansion to the state’s CalEITC passed this morning as part of Governor Newsom’s budget. In Maine, two companion bills to expand the EITC and move the state toward providing monthly cash payments to eligible Mainers both passed with unanimous support in the House and Senate. In both states, the bills passed with bipartisan backing.

At the federal level, Cost-of-Living Refund policies are quickly gaining momentum, with new Cost-of-Living Refund proposals expected to be introduced next week by Rep. Gwen Moore and Rep. Rashida Tlaib. Similar proposals have been put forward by Senator Kamala Harris, Senator Cory Booker, Senator Sherrod Brown, Rep. Tim Ryan, Rep. Ro Khanna, and Rep. Bonnie Watson Coleman.

Our economy today gives big corporations and the wealthiest Americans a leg up, while ordinary people are left struggling to keep up with the rising costs of housing, food and child care. These Cost-of-Living Refund bills in California and Maine are a big step toward financial security for families by putting money directly back into the pockets of those who need it the most.

Direct cash policies are one of the most powerful and effective tools to fight economic injustice. Maine and California are leading a nationwide Cost-of-Living Refund movement, which includes proposals by a growing number of 2020 candidates, members of Congress, and states across the country.

California’s EITC expansion will:

• Help more than a quarter (about 3 million) of California households face the rising costs of living and housing (up from 2 million households that benefited from the CalEITC in 2018), and increase the amount of benefits to $1 billion, 2.5 times the current amount

• Create a new young child boost of $1,000 for families with children under 6, which kicks in at the first $1 of earnings, recognizing the critical pre-school years and the importance of caregiving

• Greatly expand those who are eligible by raising the maximum qualifying income from $24,950 to $30,000 (to include full-time workers making the 2022 minimum wage of $15/hour), and increase the benefit for both families and workers without dependent children. California also goes further than most states in making the credit available to all working adults over age 18 without dependent children.

• Particularly benefit women and communities of color, who traditionally work lower-wage jobs (more than 2/3rds of those eligible for CalEITC in 2018 were people of color)

Maine’s EITC expansion (LD 1671) and accompanying cost-of-living tax credit legislation (LD 1491) will:

• Nearly triple the size of Maine's Earned Income Tax Credit

• Increase the credit from a 5% match of the federal EITC to 12%

• Increase benefits for recipients by $125 on average

• Reach around 100,000 people, about 1 in 7 Maine families  

• Expand eligibility to include 18 to 24 year olds without dependent children

• Establish a working group to study the most effective and efficient ways to combine the EITC with other refundable state tax credits to create a Cost-of-Living tax credit, with the option to receive the credit in monthly payments instead of as one lump sum during tax season.

California’s bill has been sent to Governor Gavin Newsom to be signed into law. In Maine, LD 1491 has already been signed by Governor Janet Mills, while LD 1671 was sent to her desk on June 20.