Updated Interactive Tool Shows How Much Californians Benefit From the State and Federal EITC

Yesterday marked the beginning of CalEITC Awareness Week, during which community organizations, state and local government agencies, policymakers, and other stakeholders will promote the California Earned Income Tax Credit (CalEITC) in an effort to maximize the number of people benefiting from this important cash-back credit. The CalEITC is a refundable state tax credit, modeled after the federal EITC, that boosts the incomes of low-earning workers and their families, helping them to better afford basic expenses. The credit was established by the 2015-16 budget package and was subsequently expanded as part of the 2017-18 budget deal.

As part of Awareness Week activities, we have updated the Budget Center’s interactive tool (see screen shot below) showing how much working Californians will benefit from both the state and federal EITC when they file their taxes this year. Our updated interactive reflects the expansion of the CalEITC, signed into law last year, that extends the credit to low-income self-employed workers as well as to working parents with incomes up to about $22,000 — roughly equivalent to a full-time minimum wage salary.

Our updated tool is designed help policymakers and advocates, as well as workers themselves, better understand the CalEITC. Specifically, this interactive estimates how much families and individuals can expect to receive from both the state and federal EITCs based on three factors: tax filing status, number of children, and earnings from work. The tool shows the size of the state and federal credits at various levels of earnings and shows that families and individuals can receive larger combined credits (federal EITC plus CalEITC) as their earnings increase up to a certain point, after which the credits phase out.

How to Use the Interactive Tool

Here are some examples of how workers can use this interactive tool to estimate how much they will benefit from the state and federal EITCs:

  • A single mother who worked 20 hours per week at the minimum wage in 2017 can enter her filing status (Single/Head of Household), number of children (Two), and annual earnings ($10,920) and see that she will be eligible for an estimated $1,227 from the CalEITC in addition to an estimated $4,368 from the federal EITC – for a combined total credit of $5,595.
  • A married father with one child who worked 30 hours per week at the minimum wage last year, earning an annual salary of $16,380, is newly eligible for the CalEITC this year. The interactive shows that he is eligible for an estimated $174 from the CalEITC in addition to $5,616 from the federal EITC, for a combined total credit of $5,790.

Using the Interactive Tool to Inform Policy Decisions

By helping policymakers, advocates, and other stakeholders better understand how the CalEITC and federal EITC work together to boost income, this interactive tool can also be used to inform efforts to further strengthen the CalEITC. For example, the tool makes clear that certain workers receive relatively small credits. Selecting “None” under “Children” at any earnings level shows that childless workers and noncustodial parents receive extremely small credits from both the state and federal EITCs. Indeed, the maximum CalEITC for these workers ($223) is just 15% of the maximum credit for workers with one child ($1,495). In addition, workers higher up the earnings scale — such as those who became newly eligible for the CalEITC this year — also receive relatively small credits. For instance, parents with two or more children and earnings above about $14,000 are eligible for credits of under about $250. However, the interactive tool also shows that these workers can receive large credits from the federal EITC, so the combination of their state and federal credits is relatively large.

Our interactive tool can also be used to assess current proposals to strengthen the CalEITC. Assemblymember Phil Ting, Chair of the Assembly Budget Committee, recently announced that building on the CalEITC will once again be a key priority for the Assembly in state budget negotiations this year, and he put forward a proposal to strengthen the credit so that it fills in where the federal EITC falls short. In addition, Assemblymember Mark Stone has introduced a bill, Assembly Bill 2066, that would extend the CalEITC to low-earning workers who are currently ineligible for the credit, including childless workers and noncustodial parents between the ages of 18 and 24 or over age 64, as well as to immigrant workers who file their income tax returns using an Individual Taxpayer Identification Number (ITIN).

With people in communities throughout California still facing significant economic challenges, and with the looming prospect of cuts to federal supports for low-income families, state policymakers must do more to help Californians advance economically. We hope that our updated interactive tool will allow policymakers and advocates to explore how continuing to strengthen the CalEITC can be part of a comprehensive strategy for expanding economic security and opportunity in our state.

— Alissa Anderson