Reward work — offer tax credit to ‘1099 workers’

There are two important ways the governor and the Legislature can improve the California tax credit in this budget.

  ·  San Francisco Chronicle

Gov. Jerry Brown and the Legislature approved the new California Earned Income Tax Credit last year. This investment reflected a common belief that hard-working people have earned basic economic security and a commonly accepted principle that rewarding work is good economic policy. The credit is widely acknowledged as the single most effective program for lifting people out of poverty.

By making $380 million available in the program’s first year, California took a critical step in increasing income for the lowest-wage earners. However, only $600,000 was allocated for outreach to encourage use of the new state tax credit. Knowing that California has historically had one of the lowest-in-the-nation participation rates for the federal Earned Income Tax Credit, a group of Californians launched CalEITC4Me, a statewide campaign that brought together the governor’s office, state agencies, statewide partners, community-based organizations, the faith community and the business community.

Due to this effort, preliminary results showed that more than 360,000 low-income Californians received the new state tax credit. But many more struggling working families earned too much — more than the $13,870 annual income threshold — to be eligible. For perspective, a person working full time at minimum wage ($20,800 annually) makes too much to receive the state credit; self-employed workers are ineligible entirely.

There are two important ways the governor and the Legislature can improve the California tax credit in this budget: increase the income threshold to reflect full-time minimum wage and include self-employed or what are commonly called “1099 workers.” Our analysis shows that these policy changes could be made without increasing the amount already designated for the tax credit — and could help many more very low income Californians by rewarding full-time work and acknowledging the large numbers of self-employed workers in our state.

In this first year, the campaign focused on the two-thirds of Californians eligible for free tax preparation. If we could help more people take advantage of free tax prep by removing barriers — lack of trust, high cost, inconvenience — they would save the $200 typically paid for tax prep and find out if they qualify for the earned income tax credit.

So we partnered with Intuit’s Financial Freedom Foundation to offer a multilingual calculator to help people determine their eligibility and find convenient free tax preparation services. By the end of the campaign, the calculator had been used almost 110,000 times, our partners had made more than 75,000 referrals to local tax preparation sites and prepared almost 35,000 tax returns themselves, and our CalEITC4Me website had more than 250,000 views.

So far, this has resulted in $180 million in refunds. In the Bay Area, where low-wage workers face very high living costs, and 90,000 families were eligible for the tax credit, these dollars translate to a huge reinvestment in the local economy.

The impact of the state earned income tax credit cannot be underestimated. While we celebrate the unprecedented participation in this first-time program, we call on state Sen. Mark Leno, D-San Francisco, and Assemblyman Philip Ting, D-San Francisco, chairs of the Senate and Assembly budget committees, to send the governor a budget that expands CalEITC eligibility.

Fiona Ma is chairwoman of State Board of Equalization. Joseph Sanberg is co-founder of, an online financial services firm, and is chair of CalEITC4Me.