ROBIN HOOD TAX PLANS
Gov. Gavin Newsom and other Democrats are looking to raise fees on the wealthy to help minimum-wage workers.
Democratic presidential candidates Kamala Harris and Cory Booker are touting Robin Hood tax plans that would raise fees on the wealthy to boost incomes of the poor and middle class.
California Gov. Gavin Newsom has one, too, and his proposal might actually become law.
Their plans are among many proposals Democratic leaders around the country are putting forward this year to divert money from the wealthy and get more cash in the pockets of lower- and moderate-income households, particularly in states with a high cost of living.
They build on the federal earned income tax credit, a benefit that provides up to $6,557 for working people with low to moderate income.
Harris’ and Booker’s plans would expand the federal benefit. They’re unlikely to become law as long as Republicans hold the majority in the Senate, but they’re markers showing what Democrats would try to do if they regain the White House.
Newsom’s is one of several proposals in statehouses that would increase similar credits offered by state governments. They’ve been raised by lawmakers this year from Washington to Maine.
The idea is to help minimum wage workers or people who can’t work full time pay their bills and gain some financial stability.
“People who are working need to be able earn enough to make ends meet and feed their families,” said Adam Ruben, campaign director for the advocacy group Economic Security Project. “States need to raise the minimum wage and hand in hand with that expand the earned income tax credit.”
California is one of 29 states that have an earned income tax credit, but California’s is a comparably narrow one, according to the California Budget and Policy Center.
Other states offer an earned income tax credit to any household that is eligible for the federal benefit. This year, that includes families with two children and income up to $51,492, according to the IRS.
California’s tax credit phases out for households when their income hits about $25,000, according to the Franchise Tax Board. Still, it can be a generous benefit for families with very low incomes. A household with two dependents and an income under $7,550 could receive $2,559, according to the Legislative Analyst’s Office.
Newsom would greatly expand who is eligible for California’s credit. He’d raise the maximum qualifying income to $30,000, create a new $500 credit for qualifying families with children under age 6 and increase the amount of money Californians can receive from the benefit, according to his budget proposal.
In 2017, 1.5 million California taxpayers received $348 million from the earned income tax credit, according to the analyst’s office.
Newsom’s proposal would make about 3 million households eligible for the benefit and potentially raise state spending by about $1 billion.
He’s also proposing a change in how beneficiaries receive the money, allowing them to enroll for monthly payments. That means a family qualifying for $2,500 credit could choose to claim it by getting a couple hundred dollars a month.
That part has advocates for low-income Californians particularly excited.
“As we know families are often seeing budget shortfalls every month, so receiving a lump at the end of the year doesn’t do as much good as regular payments,” said Teri Olle, the Economic Security Project’s California campaign director.
Newsom’s proposal in theory has a lot of support from Democrats who’ve voted to expand the state’s earned income tax credit incrementally since 2015.
“Nobody should work full time and live in poverty,” said Assemblyman Phil Ting, D-San Francisco. “We’re talking rent and food. These are things that are not seen as just nice to have. These are have to have.”
The challenge for Newsom is that he wants to pay for it by raising taxes on certain businesses. He’d do it by bringing parts of the state’s tax code into conformity with changes the Republicans in Congress made in their 2017 federal tax overhaul.
That would require a two-thirds majority in the Legislature, and Newsom might not get it.
“It’s a huge amount of money ongoing,” said Ting, who is the Assembly’s Budget Committee chairman. “You wouldn’t want to commit to it today and then ramp it down tomorrow.”
The Legislature has briefly discussed Newsom’s proposal in early budget hearings. It’s expected to return in June when the Legislature considers a final budget.
Outside of Sacramento, so-called cost-of-living refunds are key platforms on the 2020 campaign trail for Democrats.
Harris unveiled a tax proposal last fall — “LIFT the Middle Class Act” — that aimed to create a tax credit on top of the EITC for working people, whether or not they have children. Single people within certain income brackets would be eligible for a $3,000 annual credit and married couples would be eligible for $6,000. The credit would completely phase out for incomes over $100,000.
A 2017 proposal from Ohio Sen. Sherrod Brown and California Rep. Ro Khanna of Fremont would also expand on the EITC’s success in combating poverty. Rather than creating a separate credit, as Harris’s bill would do, Brown and Khanna’s GAIN Act would dramatically expand the EITC itself, for families with children as well as single adults.
Adam Ashton: 916-321-1063, @Adam_Ashton Emily Cadei: 202-383-6153, @emilycadei