To help the poor, lawmakers should focus on earned income tax credit, not minimum wage

Gov. Jerry Brown and Assembly Speaker Toni Atkins, of San Diego. Atkins is among the leading backers of an state earned-income tax credit.
Gov. Jerry Brown and Assembly Speaker Toni Atkins, of San Diego. Atkins is among the leading backers of an state earned-income tax credit. The Associated Press

From Los Angeles to San Francisco to, as of this week, the California Senate, raising the minimum wage is the solution du jour for helping the poor.

It’s not hard to understand why.

We live in an age of rising income inequality, ballooning corporate profits and shrinking working-class paychecks. A minimum wage increase is a quick fix that’s easy for voters, who are stretched to the limit financially, to understand and support.

Popular solutions aren’t always the best solutions.

A far more effective way to get money into the hands of the people who need it most would be to adopt a state version of the federal earned-income tax credit.

Unlike minimum wage hikes, which can affect as many teenagers working at fast-food joints during summers as parents struggling to make ends meet, the earned-income tax credit targets working adults, and particularly benefits parents.

The credit, based on income and the number of dependents in a household, shrinks as a family’s income climbs. The income cap is about $50,000 a year for a couple with two children.

It’s effective, too. Between 2010 and 2012, the federal tax credit pulled 1.3 million people, including almost 630,000 children, above the federal poverty line in California. It’s even more effective in the 25 states with their own versions to amplify the federal version.

Thankfully, lawmakers in the Senate and the Assembly from both parties get that.

On Wednesday, Assembly Bill 43, which would adopt a version of the tax credit, passed with bipartisan support. It is awaiting a hearing in the Senate. Meanwhile, a similar bill, carried by Sen. Carol Liu, a Los Angeles-area Democrat, passed the Senate on Wednesday.

The concept is a budget priority for Assembly Democrats, as it has become one for Gov. Jerry Brown, making its adoption at a cost of $380 million a year seem likely.

Senate Bill 3, carried by Sen. Mark Leno, D-San Francisco, would raise the state minimum wage to $11 an hour in 2016 and $13 an hour in 2017, and increase it annually based on inflation starting in 2019, costing the state tens of millions of dollars and private employers more. California’s minimum wage is set to hit $10 an hour on Jan. 1.

We don’t believe that SB 3 is the “job killer” that the California Chamber of Commerce makes it out to be. We have supported minimum wage increases in the past. But the clear benefits of an earned-income tax credit would be the most effective use of state tax dollars this year.