Editorials

People are going broke working in California’s gig economy. This will help.

In downtown Los Angeles, drivers for Lyft and Uber are everywhere. The gig economy can be lucrative, but it also can leave people in poverty. California is considering expanding a tax credit to people who work as self-employed contractors.
In downtown Los Angeles, drivers for Lyft and Uber are everywhere. The gig economy can be lucrative, but it also can leave people in poverty. California is considering expanding a tax credit to people who work as self-employed contractors. AP

For all of the hype about flexible schedules and not having to answer to an ornery boss, being self-employed in California’s gig economy isn’t always what it’s cracked up to be.

Sure, some people make a fortune renting a room on Airbnb or selling their wares on Etsy. But many others are stuck in poverty because there is no minimum wage, no paid time off and no unemployment benefits.

We’ve heard the stories about Uber drivers who work 60 hours per week, but still can’t pay their bills. And yet, the gig economy, with its emphasis on entrepreneurship and freelance work, continues to grow, with Silicon Valley at the forefront.

So it was high time the Legislature got serious about expanding the state’s earned income tax credit to Californians who are self-employed. The budget conference committee did so on Thursday as part of its spending plan; we hope Gov. Jerry Brown approves it.

Currently, the California tax credit is only available to people who work for an employer, and make less than $6,717 if they have no children, less than $10,087 with one child, or less than $14,161 with two or more children. But if the spending plan passes muster with Brown, the threshold will jump to $22,360.

That’s enough to go from 600,000 eligible households to about 1.4 million. And it’s happening at a time when short-sighted Republicans in Washington, D.C., are talking about reducing or eliminating the earned income tax credit granted by Uncle Sam.

The talk of cuts comes even though President Ronald Reagan was its champion, as was the late Jack Kemp, Speaker Paul Ryan’s mentor. Ryan himself has extolled. What better way to reward work than giving workers back the money they earned?

This wrong-headed talk in D.C. of cutting also comes as the working poor need help most. Their wages are rising, but not nearly as fast as housing prices. Just last week, a report from the National Low Income Housing Coalition found that it’s no longer possible for anyone working a full-time, minimum-wage job to afford renting a two-bedroom apartment anywhere in the United States.

In California, someone would have to earn almost $31 an hour to rent a two-bedroom place without spending more than 30 percent of his or her income – a seemingly impossible feat for many these days.

So, sure, the average earned income tax check – $524 – isn’t much. But it’s something. It can be used to pad budgets on everything from childcare to rent.

What’s more, the expanded credit will help ensure that people will be able to afford working in gig economy jobs, providing the necessary work force of contractors for tech companies. Brown has opposed the self-employment expansion. He should rethink that.

Assuming the Legislature and governor can come to a deal, the biggest challenge will be getting eligible workers to actually apply for the credit on their tax return. The program has been around for two years and yet many Californians still don’t know it exists.

More than 385,000 taxpayers applied for it in the 2015 tax year, leading to payments of almost $200 million. The numbers were higher for the 2016 tax year. But the rate is far short of the $380 million in credits that state officials predicted would be distributed to families when they launched the program.

To change that, the state pumped $2 million into outreach, which made a big difference in San Bernardino and Riverside counties this year. The same amount has been set aside for next year.

In a perfect world, every Californian who is eligible for an earned income tax credit would get one. The Uber drivers, the Etsy crafters, they work hard for not much money. They deserve a break in the form of a check they’ve earned.

  Comments