Workforce Development

California moves to include independent workers in its EITC

June 14, 2017  • Ethan Pollack & Natalie Foster

The independent workforce is an increasingly important part of the U.S. economy, accounting for 94 percent of total job growth over the last decade. There are at least 36 million U.S. workers engaged in independent work, or roughly a quarter of the U.S. workforce, and they could reach between 30 percent and 50 percent by 2020.

This trend creates a challenge for policymakers, who must ensure that these independent workers are provided the same access to employer- and government-provided benefits as traditional workers.

For example, California currently does not allow independent workers to use their independent income to qualify for the state’s Earned Income Tax Credit (EITC). This is in contrast to the federal EITC and the other 25 states with EITCs, all of which include independent income.

But last week, California took an important step toward including independent workers in its EITC. As part of the 2018 budget, the California Legislature and Governor Brown agreed to reform its EITC to include self-employment income — which would expand the credit to approximately 130,000 independent workers. It also increased the annual income threshold from $14,000 to $22,000, expanding the credit to even more employed and self-employed workers.

This is a big deal for California’s independent workers: the EITC provides an average $2,373 to its qualifying workers, which is a significant benefit for low-income families.

There is much work to be done to modernize the social contract. We must build a portable, pro-rated, and universal social safety net so that independent workers can access the benefits and protections they need to achieve prosperity and security. We applaud California for taking a step forward for independent workers.