Are Interior Design Services Taxable In California – Isaias Hernandez, executive director of the Eastmont Community Center, helps someone with their taxes during a free tax preparation event at the Nakoak Community Center in Gardena on April 1, 2023. Photo by Pablo Unzueta for
As pandemic relief dollars dwindle, low-income families still need help to recover, advocates say. Two bills would expand California’s earned income and child tax credits for families making up to $30,000.
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When Reyna Bonilla lost her job cleaning hotel rooms in 2020 at the start of the pandemic, she used tax credits and other pandemic relief to reduce previously owed rent so she and her two children could stay in apartment in Koreatown in Los Angeles.
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This year things are different. Bonilla cleans houses a few days a week but only makes about $10,000 a year. Most of her pandemic aid has been phased out, so she is struggling to keep up with costs.
Additionally, her youngest child turned 6 in November, making Bonilla ineligible for the California Youth Tax Credit. Her tax refund will be $1,083 less this year, putting pressure on her already tight budget.
“Sometimes I say I’m going to save money and I start saving,” she said, “but the prices go up and I can’t do it anymore.”
Advocates say California’s tax credits are even more critical now, as low-income families like Bonilla struggle to recover financially from the pandemic as other government relief programs wind down.
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For example, the federal government expanded its tax credits in 2020 to send monthly advance payments to low-income families with children and, for the first time, included very low-income earners. It helped reduce child poverty, but the federal credit expansion ended in December 2021.
Democratic Assemblymen Mike Gipson of Gardena and Miguel Santiago of Los Angeles recently authored two bills that would expand California’s Earned Income Tax Credit and its Young Child Tax Credit.
The bills together would cost about $1.1 billion per year, in a year the state is predicting a deficit between $22.5 billion and $25 billion.
“The need for lower-income tax credits is as dramatic as ever,” said Teri Olle, California campaign director for the Economic Security Project, a national nonprofit based in New York.
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“Gas prices, food prices — none of that is better than it was before the pandemic. Now many of these supports in place are expiring and people are left with higher prices, a higher cost of living and nothing to support them. “
The California Earned Income Tax Credit currently provides credits ranging from $1 to approximately $3,400 to tax filers who earn as much as $30,000 in annual income.
In 2022, 3.6 million Californians received the state’s earned income tax credit, according to the Franchise Tax Board. He had a moderate influence; about 83% of those filers received less than $300 in state tax credits.
That’s partly by design. The state earned income tax credit is structured to provide an incentive for people to work, so it phases out more cash as earned income increases to $30,000.
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For example, someone who earned just $200 in 2022 and has three children will receive $67 in earned income credit, while someone who made about $9,000 with three children will receive $3,417.
Those who make $30,000 get $1, regardless of how many children they have. Those who earn more do not qualify.
It targets individuals who are working and have the most needy dependents. But it leaves out many people who can’t work because they’re caring for relatives and single filers who don’t have dependents but are struggling to get by, advocates said.
Assembly Bill 1498 would increase the minimum credit to $300 from $1, regardless of the number of dependents, as long as a recipient makes less than $30,000 a year.
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On the other hand, the California Child Tax Credit currently gives $1,083 to filers with a dependent under the age of 6. When the youngest child in a family reaches the age of 6, the family no longer qualifies for the credit.
Santiago’s AB 1128 would enable tax filers with dependents who also qualify for the State Earned Income Tax Credit to continue to qualify for the young child tax credit after their youngest child turns 6. Those families would keep the child tax credit until the child reaches 18, or as old as 23 if they are a student.
Families with a disabled dependent would also qualify for the young child tax credit regardless of their dependent’s age.
“We’re in a recession, but there are still a lot of people who come out unscathed – because they have certain tax credits that our working class doesn’t have access to.” Monica Lazo, Golden State Opportunity senior policy manager
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Santiago said the proposal was a “moderate” request that would greatly benefit families that suffered the most financial losses during the pandemic.
“This program is one of our most effective anti-poverty programs,” he said. “We can expand the current program and help more people than ever before.”
The young child tax credit bill would benefit an additional 700,000 to 1 million children each year, said Monica Lazo, senior policy manager for Golden State Opportunity, an anti-poverty organization.
“The will is there,” she said. “We’re in a recession, but there are still a lot of people who come out unscathed – because they have certain tax credits that we in the working class don’t have access to.”
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Many low-income workers have been forced to go to work during the pandemic, she said, while higher earners can often work from home.
“These are people who are helping our local economy; we declared that they were necessary,” she said. “So this is a way that we can help them and really prove to them that they are necessary.”
Research shows that people spend tax credits almost immediately on essentials, such as school supplies for their children, which means the money goes back into the economy immediately. For every $1 of tax credit, $1.70 is invested in the local economy, said Anna Hasselblad, director of public policy for United Ways of California.
“Where you’re going to see the biggest stimulus and economic impact is if you invest it in lower income people,” Hasselblad said. “They are going to put that money to work immediately.”
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Taxpayers lined up for complementary tax preparation services at the Nakaok Community Center in Gardena on April 1, 2023. Photo by Pablo Unzueta for
Bonilla said she has spent her tax credits on electricity bills, clothes and shoes for her children. If she received an additional $1,083 in child tax credits each year, Bonilla said, she would save it on future expenses when her daughter starts college.
Expanding California’s earned income tax credit would benefit people of color the most because they make up three-quarters of eligible workers in the state, said Alissa Anderson, a policy researcher at the California Budget & Policy Center, a research nonprofit.
It would also simplify the process of claiming tax credits; the Franchise Tax Board would more easily identify qualifying workers and automatically send funds, Anderson said.
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Tax credits traditionally enjoy bipartisan support, but both bills could face challenges in the projected state budget shortfall. If passed, the proposed earned income tax expansion would cost about $460 million a year and the proposed expanded youth tax credit would cost about $700 million a year.
Both bills are new versions of a proposal last year that would have provided a one-time payment of $2,000 per child to families who received the California Earned Income Tax Credit.
That proposal, which was also sponsored by Santiago and anti-poverty organizations, included a permanent increase in the $1 minimum payment of the earned income credit to $255.
“When you recognize what people do and allow them to reinvest that money themselves, instead of letting the government take that option, it’s a better path.” Tom Lackey, a Republican from Palmdale.
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Last year, the state had a projected surplus of $31 billion. But as inflation rose, other state priorities emerged, such as the “middle-class tax refund” that provided $9.5 billion in financial relief to families.
Santiago pulled the bill from the Senate Governance and Finance Committee because it did not have enough votes to pass, a spokesman for Santiago said.
Assemblyman Tom Lackey, a Republican from Palmdale, said the long-term benefits of tax credits outweigh the short-term financial challenges. Lackey co-authored the bill for the earned income credit and supports the bill to expand the tax credit for young children.
“The Republican Party believes in fiscal responsibility,” he said. “When you recognize what people are doing and allow them to reinvest that money themselves, instead of letting the government take that option, it’s a better way. It’s the people’s money.”
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Asm. Mike Gipson has taken at least $1.8 million from the Labor sector since being elected to the legislature. That represents 28% of his total campaign contributions.
Asm. Miguel Santiago has taken at least $2.4 million from the Labor sector since he was elected to the legislature. That represents 37% of his total campaign contributions.
Asm. Tom Lackey has taken in at least $1.8 million from the Party sector since he was elected to the legislature. That
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