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Hundreds of thousands of children of immigrants won’t benefit from the CalEITC expansion unless policymakers act

In the next few weeks, state policymakers will decide whether to expand California’s Earned Income Tax Credit (CalEITC) — a refundable state tax credit that boosts the incomes of families and individuals who earn little from their jobs. Governor Newsom’s revised budget proposes to expand the credit beyond what he proposed in January, as we explain in our analysis of the May Revision. (For details on the Governor’s January proposal, see our chartbook.) Now all eyes turn to the Assembly and Senate budget committees, which will decide whether to adopt or revise this proposal as they develop their respective budgets in the coming days. On Tuesday, May 14, Assembly Budget Subcommittee 4 will hear the Governor’s proposal, and Senate Budget and Fiscal Review Subcommittee 4 is expected to hear it later in the week.

We at the Budget Center evaluate state policy choices based on research, and this is a case where the evidence is clear: expanding the CalEITC is a smart investment for California’s children. Decades of studies show that earned income tax credits help low-earning workers better provide for their families, while also improving children’s future prospects. Notably, while EITCs are not explicitly health or education policies, they appear to provide important health and educational benefits that likely contribute to a stronger future for children. For example, studies suggest that the EITC:

  • Fosters better health for children, potentially improving their health and economic circumstances later in life. Babies born to mothers who likely received the largest increases in the federal EITC following an expansion of the credit had the greatest improvements in standard infant health measures, such as birth weight, which is highly predictive of health and economic well-being in adulthood. Also, the likelihood of having a low-birth-weight baby fell by more than four times as much for black mothers as for white mothers, suggesting that the EITC could be a tool for advancing health equity, as rates of low birth weight are much higher for black mothers. A recent study examining state EITCs found similar effects. Rates of low birth weight fell significantly more in states with more generous, refundable EITCs. In addition, black mothers experienced the largest percentage point decline in low-birth-weight rates.
  • Boosts children’s school achievement and educational attainment, potentially improving their earnings prospects in adulthood. Children in families who received larger credits as a result of an expansion of the federal EITC scored better on reading and math tests, with higher scores among younger children. These children were also more likely to complete high school, attend college, be employed as young adults, and earn more. In addition, children whose families received larger credits from the federal EITC during the spring of their senior year in high school were more likely to enroll in college.

Although most research focuses on the federal EITC, it’s reasonable to think that the CalEITC amplifies the benefits of the federal credit, particularly given that California’s credit is the most generous, refundable state EITC in the nation for households with very low incomes. Furthermore, it’s likely that increasing the size and scope of the CalEITC, such as through the Governor’s expansion plan, which targets the largest increases to families with young children, would further enhance these benefits.

Hundreds of Thousands of California’s Children Could be Excluded From the Governor’s Proposal

As policymakers consider expanding the CalEITC, they should recognize that hundreds of thousands of California’s children whose parents earn little from their jobs can’t share in the benefits of the credit currently and won’t benefit from an expansion of the credit unless policymakers act. That’s because tax filers and all of the children they claim must have Social Security Numbers (SSNs) that are valid for work in order to qualify for the CalEITC. As a result, many California children who have immigrant parents — including US-born children — are excluded from the credit. And many more could lose access to the credit if they or their parents lose immigration relief, such as Deferred Action for Childhood Arrivals (DACA) or Temporary Protected Status (TPC), due to federal actions.

With a simple rule change California policymakers could make the CalEITC more inclusive of immigrant families and extend the credit’s benefits to their children. Specifically, policymakers could permit tax filers to claim the credit using a federally assigned Individual Taxpayer Identification Number (ITIN) or any federally assigned SSN. According to my colleague Sara Kimberlin’s estimates, more than two-thirds of the tax filers who’d benefit from this policy change live in households with children. Her estimates also show that this rule change would extend the CalEITC to an additional 346,000 to 495,000 children if policymakers also approve the Governor’s expansion of the credit, at relatively little additional cost: around $117 million to $167 million. This is less than the cost of the Governor’s May Revision proposal to invest another $190 million in the CalEITC.

If policymakers allow tax filers to use ITINs or SSNs to claim the CalEITC but do not also approve the Governor’s expansion, Sara estimates that 158,000 to 226,000 additional children would benefit from the credit, at an added cost of just $40 million to $57 million. These estimates assume a 50% CalEITC take-up rate among tax filers who appear eligible to use ITINs. However, take up could be lower given that many immigrants fear using public benefits due to anti-immigrant actions by the federal government.

Allowing tax filers to use a federally assigned ITIN or SSN to claim the CalEITC would not only allow more of California’s children to enjoy the credit’s benefits, but also it would:

  • Help to reduce the substantial disparities in economic hardship by race, ethnicity, and immigration status. The vast majority of children who could benefit from this policy change are children of color (97%) — primarily Latinx (90%) — and, by definition, all of them are children of immigrants. In California, Latinx children are more than twice as likely to live in poverty as white children. California children of immigrants in working families are also more than twice as likely to live in poverty as other children in working families.
  • Reward workers who provide valuable contributions to our state. Immigrants, including those who are undocumented, contribute billions of dollars each year to California’s state and local revenues, helping to support services that benefit all of us. Immigrants and their children are also vital to the state’s labor force, comprising more than half of California’s workers. Undocumented immigrants’ labor alone contributes more than $180 billion each year to California’s economy, according to state Controller Betty Yee.
  • Help to reduce economic instability due to low pay and immigration-related labor violations. The Californians who stand to benefit the most from a more inclusive CalEITC include farm workers, cooks, housekeeping cleaners, construction laborers, grounds maintenance workers, and janitors, according to our estimates. These workers are engaged in important, but low-paid — and often unstable — work. Compounding their economic challenges, some may be paid less than they are owed. Immigrant workers are far more likely to be victims of wage theft and other workplace violations, in spite of legal protections that cover workers regardless of their immigration status.

Making the CalEITC more inclusive of immigrant families would be a smart investment for California to make both from an equity perspective — given the valuable, but often under-valued, contributions immigrants make to our society — and from an economic perspective — given that the strength of our collective future depends on the investments we make in all of our state’s children today.

This article was released by the California Budget & Policy Center.

2 Comments

  1. Wow! Well researched and all so true. How did this state and this country get so crazy? California is a lost cause but the liberal extremists have all but ruined this entire country, as well. Illegals rights have all but usurped citizens rights. It is so telling that our liberal lawmakers put illegals above citizens. No wonder the illegals can’t wait to get into this country & this state, in particular. It’s like they just won the lottery. I personally can’t wait to be in a position to leave what used to be a great state. Pretty soon the only ones left here in California will be the welfare recipients, both legal and illegal, the homeless and the very rich. Good luck having enough taxpayers to pay for the massive government pension debt that is increasing by the day. Maybe the uninformed voters will finally get why this state has gone so far awry. In the meantime, VOTE CONSERVATIVE. It’s the only thing that might save this state and this country.

  2. THE STAMPEDE AT OUR SOUTHERN BORDER::
    Lets see, we have Democrat / Socialist / Activists in the Northern Triangle of South America & Mexico; even as you read this instructing the populations the “benefits” & laws of coming top the USA and to make sure you bring your children and use the the magic words…..”credible fear.”

    Then you have a Democrat House saying the crisis is “manufactured” as literally thousands attack our border daily? National Sovereignty is a myth to Democrats. The crisis is manufactured…by the Democrats themselves. Make no mistake about this, Democrats want this to happen and never stop.. They will with hold border security support allowing as many illegal aliens to enter the country as possible overwhelming our BP & ICE before assisting in border security (if ever).

    THE LIE OF TPS / DACA:
    To Democrats/Progressives/Socialists (whats the difference?) programs like Temporary Protective Status (TPS) or Deferred Action for Childhood arrivals (DACA) are permanent programs. There is nothing “temporary or deferred” about these programs to Democrats. These programs are designed to admit refugees (usually from the third world) then Democrats fight to keep them here permanently using the charge of racism, religion, guilt against anyone opposed. Simple formula works great.

    THE PRICE AMERICAN PEOPLE PAY::
    Besides the costs, It seems Democrats view U.S. citizens as acceptable collateral damage to their future long range goals of flooding the country with refugees & illegal aliens and having taxpayers paying the cost. Democrat politicians and their voters have put families at risk of being victimized by illegal aliens

    The current migration at our border is costing taxpayers a Kings ransom. Fleeing persecution? or fleeing for freebies? they sure don’t stay in Mexico when they reach “safety” or ask or offered political asylum in Mexico. Why? because Mexico will give them NOTHING. So they make the long journey to our border, our generous Democrats, and our tax dollars. Notice how many have made the long, difficult, dangerous journey to our country 8-9 months pregnant?

    Just a few examples of the more outrageous costs associated with illegal immigration, we will pass this burden on to our children & grand children as has been passed on to us.

    * City emergency services Taxpayer pay for every police, fire, paramedic service call for illegal aliens in their city. Taxpayers also pay for all hospital, emergency room treatments, ambulances, medications….everything. Hospital wait times for citizens are negatively impacted.

    *Cost of educating illegal aliens is staggering. From K-12 it costs taxpayers on average $122,000 for EACH illegal alien student. This does not include the millions spent on bilingual ED, instructors, special need children & day care. It is estimated nearly 100,000 illegal aliens graduate each year……you do the math. School class size are also negatively impacted by illegal aliens and our students suffer as a result.

    *Taxpayers in some states are funding “in state college tuition” discounts for illegal aliens. (AZ voted to terminate this taxpayer expense.) Cost to taxpayers over a billion dollars annually.

    *About one in five inmates in federal prison are foreign-born, & more than 90% of those are in the U.S illegally. This does not include local jails and state prisons. At roughly $24,000 per year expense per inmate.

    *$3Million Dollars a DAY is spent to incarcerate, process Illegal aliens in the criminal justice system.

    *$2.2 Billion dollars a year is spent on is spent on food assistance programs such as SNAP, WIC, & taxpayer funded school lunches. Visit youtube search “cost of illegal immigration.”

    *Mexico received 33 billion last year in remittance from our country. $120 billion total was sent out of the United States in total remittance last year.

    *Every child birth by illegal aliens in the U.S is paid for with tax dollars.In the US, the average cost to have a baby without complications during delivery, is $10,808, which can increase to $30,000 when factoring in care provided before and after pregnancy (July 9, 2018 google.)

    * Section 8 housing. Illegal aliens take full advantage of this program. Citizens & their families in poverty in many cases wait years behind non citizens for emergency housing.

    Democrat 2020 Platform & Goals:

    -Open Borders.
    -Sanctuary Cities.
    -Elimination of ICE
    -Disarming Americans.
    -Infanticide.
    -Voting rights for illegal aliens.
    -Pack the courts with radical liberal judges (Like the 9th circuit)
    -Increase refugee’s from the third world.
    -Illegal aliens allowed to hold public office.
    -Socialism.
    -Free Abortions for all (Taxpayer funded)
    -The green new deal.
    -End of Electoral College
    -Free Medicare care for all including non citizens (taxpayer funded)
    -Raise Minimum Wage
    -Have adolescents vote
    -!00% free college for all, including non citizens. (tax payer funded)
    -Reparations for every race “harmed” by the white man.
    -Convicts, Terrorists voting.
    -Susie & Bobby using the same restrooms.
    -Late term abortions.
    -Pay check for every person in the US even if they choose not to work.

    Sources: Straight from the Democrat’s mouths.

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