The economic fallout created by the coronavirus pandemic is already being deeply felt by workers and families across California. In fact, the Golden State has seen unemployment numbers skyrocket in the past several weeks, more than any other state in the nation. This is already having a disparate impact on Latinos—more than 1 in three Latino children live with someone that works in an industry affected by the economic slowdown caused by COVID-19 business closures.
When Governor Newsom announced the creation of a 125 million disaster relief fund for undocumented workers this month, it represented a major step towards providing much-needed financial support for immigrants locked out of federal COVID-19 relief. However, given that it could take many months, even years for the state to achieve a full economic recovery, our leaders in Sacramento will need to consider policies to expand the safety net to meet the needs of the state’s most vulnerable families. They can start by expanding the California Earned Income Tax Credit (CalEITC) and the Young Child Tax Credit (YCTC) to all workers, regardless of their immigration status.
What is CalEITC and YCTC?
California has two refundable income tax credits that put money back in the pockets of low-wage workers, helping them cover the costs of basic necessities:
• First, the California Earned Income Tax Credit, which is available to families and individuals earning less than $30,000.
• Second, the Young Child Tax Credit, available to families that qualify for CalEITC that have a child under 6 years of age.
CalEITC and YCTC help boost the incomes of low-income individuals and families by reducing the amount they owe when filing their state income taxes. Families and individuals who do not owe any state income taxes can claim the full credit they qualify for as a cash refund.
In 2019, more than 2 million people claimed the CalEITC, who shared $395 million from the credit. 2020 is the first year that families will be able to claim the YCTC; 400,000 California families are expected to benefit.
How does this affect Latino immigrants?
Currently, immigrants that file their taxes using an Individual Taxpayer Identification Number (ITIN) do not qualify for CalEITC and YCTC. If lawmakers modified tax credit eligibility to include all taxpayers, including undocumented workers that file using an ITIN, 388,000 families would see a boost in their income.
In California, Latino children are more than twice as likely to live in poverty when compared to white children. Expanding tax credit eligibility can help reduce economic hardship faced by low-income families—in fact, 90% of children who would benefit from an expansion of CalEITC and YCTC are Latino children of undocumented immigrants.
According to the California Budget & Policy Center, the cost to include immigrant families in CalEITC is estimated to be between $117 million to $167 million. This is a modest investment considering the fact that undocumented immigrants contribute 3.1 billion in state and local taxes annually.
California can be proactive and ensure that Latinos are not forced to bear the brunt of a future economic slowdown caused by the current health emergency. Our leaders must honor the contributions that immigrants make to our state—expanding the state’s safety net to include them and their families would be a good first step.
Written by Eduardo García, Senior Policy Fellow at the Latino Community Foundation