Tax season is in full swing across California, as millions collect documents, download software and hassle their accountants.
But for millions of Californians, tax time provides a vital financial lifeline thanks to one of the most successful, but underused, anti-poverty programs – the federal Earned Income Tax Credit.
It is available to workers between ages 25 and 64 who earn less than $39,000 to $54,000, depending on their filing status and number of children. In 2017, 2.9 million tax filers in California received $6.8 billion in credits.
In 2015, California created a state-level EITC, targeting working households living on very low incomes. To be eligible, parents must earn less than $10,000 to $14,000, and childless adults must have earnings of less than $6,700. Last year, the state put almost $200 million directly into the hands of nearly 400,000 families.
The federal and state tax credits provide the largest cash payment many families will receive in a year – money that can go toward repaying debt, building savings or buying goods and services that support economic growth.
Each year, California residents leave approximately $2 billion in tax credits on the table, with one of the nation’s lowest rates for filing for the credit.
Yet each year, California residents leave approximately $2 billion in tax credits on the table, with one of the nation’s lowest rates for filing for the credit. That money is badly needed in a state where rents are among the nation’s highest and where 45 percent lack the savings to cover even a modest emergency cost.
So this year, cities are working with community groups and private-sector leaders such as Citi Community Development to help more Californians claim the tax credit.
First, they are raising awareness. For the next three months, multi-lingual campaigns will appear on bus shelters, billboards, radio, television and social media. San Diego is reaching out to more than 10,000 public housing residents, while Oakland, San Francisco and San Jose have developed their first unified campaign.
Second, cities are partnering with community groups to expand access to free tax preparation services for California’s diverse families. The mayor’s office in Los Angeles and the Department of Veterans Affairs are partnering with California State University Northridge on a new pilot to recruit volunteer tax preparers from within the military.
Raising awareness and boosting capacity can make a big difference to working families. For example, New York City increased filings at volunteer income tax assistance sites by 50 percent, returning more than $250 million in additional tax credits and fee savings.
If we aim high, we can achieve similar results in California.
Toni Atkins, a San Diego Democrat, is the incoming president pro tempore of the state Senate and can be contacted at David.Rolland@sen.ca.gov. Bob Annibale is global director of Community Development and Inclusive Finance at Citi and can be contacted at Robert.Annibale@citi.com.