A federal program that lifted many children out of poverty expired. California can help

Despite the economic upheaval Americans experienced throughout the pandemic, we made impressive progress in reducing child poverty. Those gains are at risk, however, if we don’t take action soon.

Over the past six months, U.S. child poverty dropped by half due to an expanded federal child tax credit. The credit puts money directly in the pockets of struggling families, helping them ride out the financial uncertainty affecting millions of households.

The federal credit, however, offered only temporary relief, and monthly payments ended last December when Congress failed to permanently expand the program. As a result, 7.8 million California children are losing out, and 1.7 million of them are about to fall into poverty — again.

According to a study by the United Ways of California, one in three California households struggles to get by, even though an overwhelming share of these families include at least one working adult. These households are hamstrung by low-wage jobs and the high cost of living. They are disproportionately at the mercy of COVID-19.

Research proves that tax credits are one of the most effective ways of defeating poverty. They encourage work; improve the health of infants and mothers; boost educational outcomes and lifelong earnings for children; and fuel local economies. Such high impacts make tax credits for working families a no-brainer, especially when state coffers are flush, as California’s $45.7 billion-and-growing surplus suggests.

To improve lower-income families’ standard of living, California has used state tax credits to great effect. The California earned income and young child tax credits provided over $1 billion to 4.3 million people last year.

Now that the federal child tax credit expansion has expired, the California Legislature can and must do more to help struggling families. This is why anti-poverty groups recently rallied behind Assembly Bill 2589, which would put more cash in the hands of eligible families.

The legislation would backfill the federal child tax credit with a one-time payment from the state. Families that earned less than $30,000 in 2021 would receive $2,000 for each qualifying child. Such an effort — costing $3.8 billion — would reach 2 million California children, the vast majority of whom are living in or on the brink of poverty.

To further boost the state’s earned income tax credit, AB 2589 would create a minimum credit of $255 for all qualified tax filers. According to the California Budget & Policy Center, about half of all workers without children at home receive a state earned income credit of less than $100 with a minimum credit of $1, yet the majority of these workers are excluded from the federal earned income credit.

In the meantime, California must take some easy and affordable steps to guarantee that people receive the tax credits they deserve. The state should increase outreach efforts to notify families that qualify and increase funding for free tax filing services where they can receive assistance.

Last year, only 1% of Californians who received the state earned income credit used a free tax filing service. These families shouldn’t have to worry about paying tax preparers or be exposed to predatory “refund advance” programs that charge exorbitant fees.

California can stem the tide of childhood poverty by using our surplus revenue to improve the lifetime odds of success for millions of kids. The need is urgent, the goals are evidence-based and the budget math is favorable. It’s critical that the Legislature and Gov. Gavin Newsom show the rest of the nation how to end child poverty.