Capitol Alert

Jerry Brown proposes tax credit for poor

Gov. Jerry Brown
Gov. Jerry Brown rpench@sacbee.com

In a concession to more liberal strains of the state’s Democratic-controlled Legislature, Gov. Jerry Brown will include a tax credit for California’s poorest families in a revised budget plan he releases Thursday.

The administration said the earned income tax credit would benefit about 825,000 families at a cost to the state of about $380 million annually.

Brown, a fiscal moderate, has been criticized by liberal activists for his reluctance to increase funding more substantially for California’s poor.

An earned income tax credit was among the budget priorities Assembly Democrats unveiled earlier this month. Brown’s proposed credit would complement the existing federal earned income tax credit, decreasing the tax liability of poor people.

About half of the nation’s states offer versions of the federal earned-income tax credit, according to a December report by the Legislative Analyst’s Office.

Brown’s proposal, first reported by the Los Angeles Times late Wednesday, was confirmed by the administration that night. It will be included in Brown’s May budget revision, touching off weeks of budget talks at the Capitol before lawmakers adopt an annual spending plan in June.

The tax credit proposal comes amid ongoing improvement in California’s budget condition, with heightened calls for increased spending by Democrats and social service advocates. Brown, a fourth-term Democrat, has long clashed with members of his own party on budget matters.

The state controller’s office said Monday that General Fund receipts were surpassing estimates by $3.4 billion with two months left in the fiscal year. The Legislature’s nonpartisan fiscal analyst has reported that revenue for the full year could exceed estimates by more than $4 billion.

Most of the additional revenue is expected to go to schools and community colleges under Proposition 98, California’s school-funding guarantee.

The tax credit would apply to families based on household wages and number of children - up to $6,580 for households with no dependents or up to $13,870 for households with three or more dependents.

The administration estimated the average household benefit at $460 per year, with a maximum credit of $2,653.

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