California Budget Project Budget Brief How Can A State Earned Income Tax Credit Help Californias Working Poor Make Ends Meet 3 01 PDF Download

One of the most powerful tools available to boost the incomes of the working poor is the federal Earned Income Tax Credit (EITC). [...] Almost all of the benefits of the credit would accrue to taxpayers in the form of a refund. [...] Estimates suggest that the cost of administering the federal credit is approximately 5 one percent of the programs costs, extremely low compared to administrative costs of other income support programs such as CalWORKs and Food Stamps.11 Californias Franchise Tax Board previously administered a refundable renters tax credit and a refundable child care credit was established as part of the 2000 bud. [...] Administrative costs attributable to the added workload of the renters tax credit were less than one percent of the total cost of the credit.12 Recent changes to the federal EITC have helped ensure that the credit is only claimed by eligible fami- lies. [...] In response to this criticism, the IRS now requires taxpayers to submit Social Security numbers for all parents and children claiming eligibility for the credit; imposes strict scrutiny of returns filed claiming the EITC; and has changed the rules which allowed taxpayers to claim the refundable portion of the EITC as a rapid refund.