06/27/2017 by Joe Sanberg
Want to pull Californians out of poverty? Consider the EITC
(Photo Credit: Carissa Rogers/Flickr)
This is the latest in a series of columns on what can and should be done to improve upward mobility in California. We at California Forward and the California Economic Summit welcome your comments and ideas.
California is a state that was once synonymous with economic opportunity. But in 2017, upward mobility is harder and harder to come by for those not born into privilege. Our state’s middle class is shrinking, and the pathways to reach it are drying up fast. We used to take it for granted that each generation would do better than the one before. Now, many young Californians would feel lucky just to do as well as their parents.
This is still a state with immense wealth, but the California that those in Pacific Heights and Beverly Hills enjoy isn't the same California that everyone else experiences. 18 million of our neighbors are living in or near poverty. Even more shocking is the fact that 3 out of 4 Californians couldn't handle a $700 financial shock. Think about that. That means that 75 percent of our neighbors are always looking over their shoulder, wondering if some unexpected expense is going to put them into turmoil. They’re one busted pipe, blown tire, or broken wrist away from a financial crisis. This kind of economic strain doesn’t just make life difficult, it chips away at people’s humanity.
I know first-hand what this kind of financial stress can do to a family. My mom raised me by herself in a low-income household in Orange County. She worked hard to create a better life for me and I was so fortunate to get a ton of financial aid to go to Harvard – and gain access to the upward mobility that comes with that that kind of education.
But there are millions of kids growing up today who will not have the same good luck that I had. The opportunities that people have in life shouldn’t be the result of chance. Every child born in this country, and particularly in a state as affluent and progressive as California, should have a path to the middle class and beyond — regardless of what zip code they live in.
In one of the richest states in the richest country on the planet, no one who is working full time should be raising children in poverty. California ought to be the state where if you work, you enjoy full financial security. Yet that’s the reality millions of families face every day, working full time or longer but still living in a constant state of financial stress and uncertainty. And for those not lucky enough to have full-time work, California has the highest rate of poverty of any state in the country.
For many in our state, the problem isn’t finding a job – it’s that jobs simply don’t pay enough anymore. Employment alone is no longer enough to provide for a family.
So, what do we do about it? There is no one solution that’s going to fix everything that’s wrong with our economy, but for me, there is a clear place to start, and it’s where I’ve focused my efforts for the past several years: the earned income tax credit. The EITC is a cash back tax credit that makes work pay better, and it’s the most effective anti-poverty measure on record. The way it works is simple: low-income workers get money back from the government based on how much they earn, and how many children they have. It directly, effectively, and efficiently puts money back in the pockets of families who need it most.
It has existed at the federal level for 35 years, and is responsible for bringing financial security to tens of millions of families -- including the one I grew up in. Two years ago, California launched its own EITC, and I started a service organization called CalEITC4Me to organize throughout California to ensure everyone gets their EITC, and to fight for substantial EITC expansion. This year, after fighting hard to expand eligibility, the number of families helped by California’s EITC will nearly triple.
But we have more work to do. I firmly believe that the single most effective thing we can do right now to give every Californian a chance to succeed is continue to work to substantially expand the EITC. Decades of evidence suggest that the EITC is the single most effective tool we have for lifting families out of poverty. It creates badly-needed financial security for families barely making ends meet, and offers them a chance to get ahead and achieve self-sufficiency. It gives parents hope that their children will have a chance at a better life.
Children in families receiving the EITC are healthier and perform better in school. They score higher on tests and are more likely to graduate from high school, enroll in college, and earn more when they enter the workforce. One study shows that for every $3,000 in additional income the family of a low-income child receives, that child’s earnings come adulthood will increase by 17 percent. Kids who receive benefits like the EITC now are less likely to need support when they start families of their own.
The EITC is certainly not the only way to restore upward mobility to our economy. In the coming weeks and months, others will offer their own solutions on the pages of this site. And at the California Economic Summit in San Diego this November, public, private, and civic leaders from around the state will come together to craft a comprehensive and ambitious agenda for restoring opportunity and sustainable growth.
But the EITC is a good place to start. It’s one of the best tools we have for building a fairer economy and providing everyone with a basic level of economic security – because in California, the chance to live your fullest life shouldn’t come down to the luck of the draw.
Joseph N. Sanberg is the founder of CalEITC4Me and Co-Founder and Chair of Aspiration.com and also serves as a member of the Leadership Council for California Forward.
Categories: Elevate CA