California’s new governor proposes to double income tax credits for low-earners

California’s new governor proposes to double income tax credits for low-earners
24 Jan 2019

California's newly sworn-in governor Gavin Newsom has said he intends to more than double the state’s Earned Income Tax in order to benefit low-earners.

The federal Earned Income Tax Credit currently supplements the annual tax refund to households making less than US$45,802 per year. California’s state version, the California Earned Income Tax Credit (CalEITC), provides an extra refund for those making less than US$22,000 per year. Families and individuals working at, or below, the full-time minimum wage threshold are eligible for refunds of up to US$2,879.

But the new Budget plan would more than double the funding that CalEITC receives. This means that 400,000 more low-income families would be entitled to gain assistance on a monthly instead of annual basis, according to Fast Company.

By switching to a monthly payout, families receiving assistance would be better able to manage their finances than under the current system, which requires them to stretch out a single payment over the entire year.

Under Newsom’s proposed expansion plans, the CalEITC budget would jump from US$400 million to US$1 billion. This hike would make it possible to raise the programme’s income cap to US$30,000 a year, enabling 400,000 more households to become eligible for benefits.

Currently, CalEITC provides families with about US$2,879 per year. The expanded version would reportedly more than double this figure, with an additional US$500 given to families with young children.

For now, the proposal is in its early stages, so the specific payment plan has not yet been released. But the extra US$600 million is expected to come from increasing corporate taxes or income taxes for the wealthiest Californians, Futurism reported.

Newsom has also proposed funding six months of partial-paid leave for new parents, the National Law Review reported. The plan would compensate new parents or care-givers for up to 70% of their wages to care and bond with a new born or adopted baby.

If passed, Newsom’s proposal would set a US precedent. It is currently the only developed country in the world that does not guarantee paid time off for new mothers.

Since there is no national paid family leave, some states have enacted their own legislation to provide paid leave. For example, New Jersey, New York, and Rhode Island offer paid parental and caregiving leave, while Washington, Massachusetts, and the District of Columbia have paid leave policies that are set to start paying out within the next couple of years.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER STORIES THAT MAY INTEREST YOU

US Democrats introduce controversial $15 minimum wage bill

US Congresswoman proposes controversial 70% income tax on high earners

US wage inequality on par with poor Latin American Countries, warns analyst

California's newly sworn-in governor Gavin Newsom has said he intends to more than double the state’s Earned Income Tax in order to benefit low-earners.

The federal Earned Income Tax Credit currently supplements the annual tax refund to households making less than US$45,802 per year. California’s state version, the California Earned Income Tax Credit (CalEITC), provides an extra refund for those making less than US$22,000 per year. Families and individuals working at, or below, the full-time minimum wage threshold are eligible for refunds of up to US$2,879.

But the new Budget plan would more than double the funding that CalEITC receives. This means that 400,000 more low-income families would be entitled to gain assistance on a monthly instead of annual basis, according to Fast Company.

By switching to a monthly payout, families receiving assistance would be better able to manage their finances than under the current system, which requires them to stretch out a single payment over the entire year.

Under Newsom’s proposed expansion plans, the CalEITC budget would jump from US$400 million to US$1 billion. This hike would make it possible to raise the programme’s income cap to US$30,000 a year, enabling 400,000 more households to become eligible for benefits.

Currently, CalEITC provides families with about US$2,879 per year. The expanded version would reportedly more than double this figure, with an additional US$500 given to families with young children.

For now, the proposal is in its early stages, so the specific payment plan has not yet been released. But the extra US$600 million is expected to come from increasing corporate taxes or income taxes for the wealthiest Californians, Futurism reported.

Newsom has also proposed funding six months of partial-paid leave for new parents, the National Law Review reported. The plan would compensate new parents or care-givers for up to 70% of their wages to care and bond with a new born or adopted baby.

If passed, Newsom’s proposal would set a US precedent. It is currently the only developed country in the world that does not guarantee paid time off for new mothers.

Since there is no national paid family leave, some states have enacted their own legislation to provide paid leave. For example, New Jersey, New York, and Rhode Island offer paid parental and caregiving leave, while Washington, Massachusetts, and the District of Columbia have paid leave policies that are set to start paying out within the next couple of years.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER STORIES THAT MAY INTEREST YOU

US Democrats introduce controversial $15 minimum wage bill

US Congresswoman proposes controversial 70% income tax on high earners

US wage inequality on par with poor Latin American Countries, warns analyst

Leave a Reply

All blog comments are checked prior to publishing