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California Democrats want to give poor immigrants a tax break. Gavin Newsom isn’t on board yet

Gov. Gavin Newsom has a plan to triple spending on a tax break that puts money in the pockets of low-income families, and top Democrats in the Legislature are pushing him to open the program to undocumented immigrants.

They’re at odds over how best to expand California’s earned income tax credit, a four-year old program that provides up to $2,559 a year to very low-income families.

The credit is modeled after one offered by the IRS that gives up to $6,557 to working people with low- to moderate-income.

Together, the state and federal tax credits provide substantial help families living on the margin, Newsom said at a Tuesday press conference.

“The earned income tax credit is one America’s great anti-poverty” programs, he said. “It’s a working families credit.”

Democrats who control the Legislature by and large agree with him.

They’re mostly on board with his plan to greatly expand who is eligible for California’s credit by raising the maximum qualifying income to $30,000, creating a new $1,000 credit for qualifying families with children under age 6 and increasing the amount of money Californians can receive from the benefit.

Newsom’s administration estimates the expansion would cost about $1.2 billion a year. He estimates about 3 million households would be able to claim the expanded credit he’s proposing.

In 2017, 1.5 million California filers received about $350 million from California’s earned income tax credit, according to the Legislative Analyst’s Office.

But Newsom isn’t ready to extend the program to undocumented immigrant families who pay taxes to the IRS and California’s Franchise Tax Board, according to his Finance Department.

Undocumented immigrants are able to pay income tax with so-called Individual Taxpayer Identification Numbers. In 2015, families with ITINs paid $23.6 billion in federal income tax.

Advocates for immigrants have been trying to persuade California leaders to open the program to those taxpayers for two years. They came close last year, when the Assembly supported opening California’s earned income tax credit to filers with ITINs, but former Gov. Jerry Brown’s administration declined to include the proposal in the state budget.

The Franchise Tax Board estimates that allowing ITIN filers to claim the credit would cost the state about $65 million a year.

This year, both the Senate and the Assembly have voted to allow all low-income immigrant families to claim the tax benefit, raising expectations among advocates.

“We’re hopeful the Legislature and the governor will make sure immigrants are no longer excluded from such a critical program as Cal-EITC,” said Sasha Feldstein, a policy analyst for the California Immigrant Policy Center.

“If the governor wants to have a California for all, then we need to make sure the state’s investments for poverty fight poverty for every Californian,” she said. Newsom branded his $213 billion state budget proposal as a “California for All” spending plan.

California lawmakers this week are sorting out differences between their spending priorities at a budget conference committee. They have to pass a final budget by June 15.

Several lawmakers at a budget hearing Tuesday pressed Newsom’s staff on why he didn’t extend the tax credit to immigrant households.

“We were not able to finance that in our budget proposal at this time,” Newsom’s budget director, Vivek Viswanathan, said at the committee hearing.

Newsom at his press conference declined to comment on lawmakers’ preference to offer the tax credit more broadly. “We’re in the middle of negotiations,” he said.

Advocates for lower-income families are excited about Newsom’s proposal for a number of reasons.

He wants to allow taxpayers to receive money from the state credit on a monthly basis instead of once a year after they file their taxes. That could allow parents to plan a regular budget with the extra cash.

“It’s been very helpful getting my son to and from school,” Sarah Delte of San Jose said at a roundtable with Newsom. She said she has used money she received from the earned income tax credit to hire reading tutors for her son. “That money may not seem like a lot, but it is.”

Newsom’s proposal has a couple of administrative challenges. The state may need federal approval to release the money on a monthly cycle, for instance. Newsom acknowledged it may take months or years to work out that process.

He also wants lawmakers to pass a narrow tax increase to fund the expanded program. It would come from partially conforming California’s tax code to the federal tax overhaul that President Donald Trump signed in 2017, raising about $1.2 billion in revenue by restricting certain deductions for businesses.

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Adam Ashton is The Bee’s Capitol Bureau Chief. He leads a team of reporters covering California politics and government. His assignments for The Bee and its sister papers have taken him from Merced to Baghdad since joining McClatchy in 2004.