Archived: A Billion Dollars: Serious Money for Californians

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To paraphrase a WWI French General — California’s economy is floundering, its tax base is disappearing, unemployment is at modern record levels, poverty is growing, the state is drowning in red ink — so now, now is the time to attack, to find a nugget of hope and treasure that can help people and the state, that can cut back on state expenditures and to, again, help people who need it.

There’s a billion dollars on the table in federal Earned Income Tax Credit (EITC) that California can help bring home to an estimated 600,000 California families that they are entitled to now but don’t get and can get with just a tiny tweak by the State Legislature in next week’s Governor-called Special Legislative Session.

That’s a BILLION dollars for families that really need it, EITC-eligible people who generally earn less than $25,000 or $30,000. These are families that are being devastated by this once in a lifetime economic disaster that is eroding the basic ability to endure such hard times.

The Federal government and 20 other states have a program of free filing of federal and state tax returns that assists families to file federal and state taxes and the service is free, it’s called “IRS Free File.” This is the program that will help deliver a billion dollars in checks to the families who so need the money now, not down the road if and when new programs are developed. This program exists now and has been used for a decade.

This is a public/private partnership between the IRS and the American software industry. It provides free online tax preparation and filing to low and middle income families throughout the country. Any family earning $56,000 or less can use this system free of charge. This program is almost ten years old and has been used by millions of families and it doesn’t cost public taxpayers a cent.

California is not part of that system.  It has its own program (Ready Return) that doesn’t complete the federal return so when one uses the California system that filing is not made with the Internal Revenue System (IRS) so an estimated 600,000 families are not filing for the federal earned income tax credit and getting a billion dollars in checks mailed to them like those who use IRS Free File.  We must remember that President Ronald Reagan commented on the Earned Income Tax Credit as it being the most effective way to fight poverty in the country.

That being the case why doesn’t the state switch to IRS Free File?

If it does, the state can stop spending millions on its own program.  If it does, the state can take those saved dollars and spend them on programs the public needs of law enforcement, schools, roads and all the other necessary things the State needs to do. If it does, an estimated $3 or $4 per state return can be saved. That could amount to millions.

Yes, I’m being redundant. There are millions of dollars that can be saved here if the Legislature will do this for everyone earning less than $56,000 through Free File. Those people make up 70 percent of those that file income tax forms and that is a lot of people.

Combining the millions that will be saved with a billion dollars coming to California to those 600,000 families that aren’t automatically getting that money now, we are talking a mini-Gold Rush here, aren’t we?

If I were a state assembly person or state senator I would count the hundreds of thousands of Californians who would benefit by one thousand million dollars from using IRS Free File, count the millions saved in the state budget next year and thereafter and be thankful that I would have the opportunity to vote on ending the California program and joining a national system that does what it does. I would vote to do this for all California.

Raoul Lowery Contreras is a political columnist whose books are available at amazon.com.

Posted - Copyright © 2022 Eastern Group Publications, Inc.

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  1. The EITC issue in the ReadyReturn policy debate is a red herring. There are no prohibitions whatsoever related to the existence of ReadyReturn that would prevent an eligible taxpayer from using the federal Free File Alliance to claim their refundable federal EITC credit. ReadyReturn does not have to go away, nor does California have to “join” a state free file program in order for an eligible taxpayer to use free preparation software through IRS.gov to file their federal return and claim the EITC. It is illogical to assume that the prospect of being able to get your federal and state return done at essentially one time is an inducement to generating more EITC filers. The attraction of the EITC is the federal refund, not the value of getting your federal and state return done. Taxpayers are neither drawn to the EITC nor discouraged from taking it because of either the presence or absence of the state return. The lack of utility for the EITC in California is due to a whole host of reasons that are not remotely connected to ReadyReturn, and it most assuredly would not be cured by one state free file product’s replacement of it.
    The cost to maintain ReadyReturn per year is barely more than $100,000. Yet, if it were discontinued, thousands of taxpayers would not be eligible for Intuit’s free file service. Their choice, then, would be to complete their return by pen and calculator, buy software, or use a preparer. Their cost, in contrast, would be millions of dollars, and the cost to the state would rise as well.

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