Sacramento, CA – Assemblywoman Sally Lieber (D-San Jose), Speaker pro Tempore of the California State Assembly, commended Governor Schwarzenegger today for his action in signing Assembly Bill 1078, as an essential first step to ensure California’s lowest income workers have greater opportunity to access the federal Earned Income Tax Credit.
 
"The federal Earned Income Tax Credit supplements the wages of working families until they are able to get higher-paying employment," Assemblywoman Lieber stated, "But too many of our lowest-income workers don't take advantage of the Earned Income Tax Credit.  This bill will help them find out about it, apply, and build productive assets to move to self-sufficiency.”

Assemblywoman Lieber's A.B. 1078 will affect CalWORKs clients.  CalWORKs is the state's temporary assistance program for needy families, providing them with minimal grants while they participate in welfare-to-work activities such as education, part-time jobs, and on-the-job training.

A.B. 1078 accomplishes three main goals:

• It draws down federal dollars to help CalWORKs recipients qualify for and receive the federal Earned Income Tax Credit (EITC), a successful anti-poverty program that incentivizes work through a refundable federal income tax credit for low-income working individuals and families.

• It encourages and helps CalWORKs applicants and clients to invest some or all of their EITC rebates, or any other funds they are able to save, to allow the build-up of productive assets.  It removes penalties for investing in retirement accounts, individual development accounts, and restricted savings accounts for education, homeownership, and small business start-ups.  Under current law, families who need temporary public assistance are required to spend down or cash out all of their savings (including EITC refunds) in order to meet the asset limitations for eligibility.

• It reduces administrative costs by eliminating duplicative and conflicting regulations by aligning CalWORKs asset caps and eligibility guidelines with other public benefits, such as Food Stamps and Medi-Cal.

The EITC is the ‘largest and most important anti-poverty program’ in the nation according to a report entitled, “Building Family Economic Success: The Earned Income Tax Credit” from the Annie E. Casey Foundation.  The EITC, sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families.  Congress originally approved the program in 1975 in part to offset the burden of social security taxes and to provide an incentive to work.  When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

A worker can receive up to $4,536 in EITC payments depending on an individual’s tax filing status and number of children.  For example, for those with two or more children, the EITC pays 40 cents for every dollar of earned income up to $11,340 of wages.  However, many low-income workers do not receive the maximum EITC payment because they have too little ‘earned income’ as defined in federal law—in fact, an estimated $1 billion in EITC funds go unclaimed each year by eligible California households.

“We know the poverty gap in California continues to grow despite the great wealth in our state.  I’m very pleased the Governor recognized the importance of providing additional opportunity for low income workers to improve their economic standing,” Lieber said.

Need help figuring out the EITC?  Go online or call toll free . . .

• Use the interactive EITC Assistant to find out if you qualify.  It is available in English and Spanish at www.irs.gov/eitc.

• Call the IRS toll free at 1-800-TAX-1040.

• Visit a Volunteer Income Tax Assistance (VITA) site for free help and tax preparation, or see your tax preparer.  To locate the nearest VITA site, call 1-800-829-1040.

Taxpayers can also call a special phone line established by the State of California for EITC information: 1-888-3MY REFUND (for English) or 1-866-9MI DINERO (for Spanish).