Amid Growing Poverty Crisis and Rising Inequality, Asm Rev & Tax Committee…
FOR IMMEDIATE RELEASE April 30, 2025
… Votes to Expand Tax Credits for Californians with Low Incomes
SACRAMENTO, CA — On Wednesday, Prosper California praised members of the Assembly Revenue and Taxation Committee, including Chairman Mike Gipson, for passing its sponsored bills, AB 397 (D-M. González) and AB 398 (D-Ahrens). These measures are essential to families who are struggling to keep afloat amid soaring costs for everyday basics and to combat California's growing poverty crisis and rising inequality, which could worsen as a result of federal funding cuts.
“California is the fourth largest economy in the world — we have both the resources and the responsibility to lead with bold, poverty-fighting policies,” said Shimica Gaskins, President and CEO of GRACE - End Child Poverty CA. “Expanding the Young Child Tax Credit and the CalEITC through AB 397 and AB 398 is a practical, proven way to help families. These bills put money back into the hands of people working hard to keep up with the high cost of living, and they’re exactly the kind of solutions we need to make California more affordable for everyone.”
“We applaud the Assembly Revenue and Taxation Committee for advancing AB 397 and AB 398 — smart, strategic investments that put money back in the pockets of working Californians,” said Amy Everitt, President of Golden State Opportunity. “At a time when federal support is being stripped away, California is once again stepping up to lead. These bills move us closer to an economy where everyone has a fair shot at financial security.”
"As leaders in Congress and the White House push to slash health care, food assistance, and other vital benefits — while handing billions in tax breaks to the wealthy — California must strengthen programs like the Young Child Tax Credit and the CalEITC, said Alissa Anderson, Policy Director, California Budget & Policy Center. “At the same time, state leaders should close tax loopholes for profitable corporations and the rich, to raise the revenues needed to help protect Californians from the harmful consequences of these reckless federal proposals."
Last week, Governor Newsom celebrated California becoming the world’s fourth-largest economy. At the same time, our state has the nation’s highest poverty rate when adjusted for cost of living. Noting our state’s vast wealth and inequality, Prosper California called on state lawmakers to continue building on California’s historic poverty-reducing and equity-building tax credits.
"Even though California produces an incredible amount of wealth, as our Real Cost Measure study shows, one in three Californians — overwhelmingly working families — continue to face difficulties making ends meet," said Pete Manzo, president and CEO of United Ways of California. "We have to ensure that working Californians are able to afford a decent standard of living. We've made progress, but more needs to be done, and it is achievable, through policies like refundable tax credits and other income support programs."
In 2024, more than $1.4 billion in cash payments through the CalEITC, YCTC, and Foster Youth Tax Credit (FYTC) were claimed by more than 3.5 million Californians. The CalEITC provides eligible tax filers up to $3,644, and the YCTC and FYTC both provide up to $1,154 when they file their taxes. Research indicates that these tax credits have become a powerful tool to reduce poverty and promote racial equity. Around three in four Californians eligible for the CalEITC are people of color, including about half who are Latine, and more than eight in ten Californians likely eligible for the YCTC are people of color, about two-thirds of whom are Latine. These credits help build an economy that works for all Californians, by lifting up families — especially Black and Brown communities — who, as a result of structural racism, need the most support.
In addition to strengthening investments in refundable state tax credits, Prosper California is urging state lawmakers to restore $20 million in annual funding for Free Tax Preparation Administration (FTPA) and Outreach and Education (O&E) programs that are crucial to help reach more people. This is especially urgent given the federal administration’s recent actions to eliminate the federal free tax filing system known as Direct File, close local IRS offices and taxpayer assistance centers, and slash the federal IRS workforce. Restoring FTPA, O&E grant funding will help blunt the impact on families who could lose out on thousands of dollars in refundable tax credits.
These programs also help connect tax filers to other crucial safety net programs like WIC, SNAP, and health care – programs that are also on the federal chopping block. Restoring FTPA, O&E funding will ensure that Californians who are struggling to make ends meet have the support they need to claim their tax credits, helping to afford soaring costs for fresh food, gas, childcare, and rent.
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