The Budget Center launched a new interactive tool on our website today that shows how much working Californians will benefit from the state’s new Earned Income Tax Credit (EITC), which was established by lawmakers this past June and is modeled on the federal credit of the same name. This new tool will help policymakers and advocates, as well as workers themselves, to better understand how the state credit works. Specifically, this interactive tool estimates how much low-income families and individuals can expect to receive from both the state and federal EITCs based on their tax filing status, number of children, and earnings from work. The tool also displays the size of the state and federal credits at various levels of earnings and shows that families and individuals can receive larger combined credits as their earnings increase up to a certain maximum level, after which the credits phase out.
How to Use the Interactive Tool
Here’s an example of how a worker can use this interactive tool to estimate how much she will benefit from the state and federal EITCs:
A single mother who worked three eight-hour days each week at the minimum wage for half of 2015 can enter her filing status (single), number of children (two), and her annual earnings ($5,616) and see that she will be eligible for an estimated $1,909 from the state EITC in addition to an estimated $2,246 from the federal EITC.
This worker can also see how the state and federal credits encourage and reward work. For instance, she can find that if her earnings had been $936 more in 2015, which is equivalent to her working four additional hours per week, she would have qualified for an additional $319 from the state EITC and $375 from the federal EITC. On the other hand, if she had worked four fewer hours per week, earning $936 less for the year, this would have reduced her state and federal credits by $318 and $372, respectively.
By sliding the yellow button along the “annual wages” bar just below the visual display of the state and federal EITCs, this worker can also see that while the state credit would begin to “phase out” (decline) if her annual earnings rose above $6,935, the federal credit would continue to “phase in” (increase) so that the size of the two credits combined would grow until her earnings reached $13,870.
Using the Interactive Tool to Inform Policy Decisions
By helping policymakers and advocates better understand how the new state EITC, along with the federal credit, currently benefits Californians at different earnings levels, our interactive tool can help policymakers, advocates, and other stakeholders consider how the state credit might be strengthened in future years. For example, our tool can inform decisions about what size of credit to provide next year. (As part of the state’s annual budget negotiations, the Legislature and Governor must set the state EITC at a particular percentage of the federal EITC for workers with earnings in the “phase-in” range of the credit, as we explain here.) Our tool can also help inform and lay the groundwork for efforts to expand the state credit in other ways, such as by broadening it to additional workers with low earnings.
— Alissa Anderson