High housing costs and low-wage work make it hard for low-income Californians to meet their basic needs. The result? Nearly a quarter of California’s youngest residents live in poverty—a fact with profound educational, health, and economic repercussions now and in the future. Social safety net benefits help low-income families supplement their incomes but do not reach the working poor in high-cost areas and the very poor across the state.
A new PPIC report examines how high housing costs and low wages contribute to child poverty. It also looks at additional policy approaches: an expansion of the Earned Income Tax Credit, establishment of a state child credit, and an overhaul of the state renter’s credit. Each approach holds promise, and each involves trade-offs.
Researcher Caroline Danielson presented the report in Sacramento last week. She also demonstrated an interactive tool that allows for a deeper exploration of how policy changes could affect California’s diverse counties. It underscores the need for policymakers to be strategic in determining how best to help families in need throughout the state.
Read the report Reducing Child Poverty in California: A Look at Housing Costs, Wages, and the Safety Net.
Explore the accompanying tool Interactive: Reducing Child Poverty in California.
Today, when many policy preferences are often divided along party lines, there is partisan consensus on this issue: at least 70% of Californians across parties say they would be unwilling to increase student fees to fund higher education. Indeed, less than a third of Californians across all regions and demographic groups say they would be willing to increase student fees.
Another way to increase funding for California’s public colleges and universities would be to admit more out-of-state students, who pay higher tuition. Californians are somewhat divided on this issue, with half saying they would not be willing to admit more out-of-state students, while 46% say they would be willing to do so. However, only 21% of Californians support admitting more out-of-state students if this would mean admitting fewer in-state students. This view holds across party lines: only one in four Republicans (25%), and even fewer independents (21%) and Democrats (16%), are willing to admit more out-of-state students if this would mean admitting fewer in-state students. UC has proposed increasing systemwide out-of-state tuition and fees by over $1,600 to almost $40,000.
Both measures hold promise for raising significant funds and represent an alternative source of revenue in a state that is heavily dependent upon personal income taxes. Together, they could bring in more than $2 billion in state revenue. This would be significantly more than the state’s other sin tax on alcohol, which raised about $350 million in 2014.
Nationally, California had the second-lowest cigarette smoking rate in 2014 (after Utah). But it’s worth noting that e-cigarette use nearly doubled among California adults from 1.8% in 2012 to 3.5% in 2013, complicating estimates of future revenue. If passed, the tax would also apply to e-cigarettes. If Californians use e-cigarettes as a substitute for cigarettes, then the measure will also capture revenue due to increased e-cigarette use. As we noted in our recent report, the additional revenue generated by taxing marijuana could be as much as $1 billion a year for the state. In the first full year after legalizing recreational marijuana, Colorado raised just over $120 million in state revenue, and Washington collected slightly less than $130 million. Given California’s larger population, the $1 billion figure is in the right ballpark. But since much is still unknown about the marijuana market, any estimate should be treated with caution.
The proposed taxes would be comparable to those currently in place in other states. If the tobacco tax passes, it would boost per capita revenue from $21 per resident to $50 per resident. This would still be below the national average of $57 per resident, though it would be much closer. For marijuana, the estimate of $1 billion in revenue would translate to about $26 per resident. Though there isn’t a national reference point for marijuana taxes, this number would be higher than the per capita amounts raised in Colorado and Washington. Interestingly, California’s alcohol tax revenue is less than most other states. On a per capita basis, California ranks 40th of the 50 states in alcohol revenue collected. In 2014, California collected only $9 per resident in alcohol taxes compared to the rest of the country, which raised $21 per resident. Doubling this rate—which would still be below the national average—could add another $350 million to state revenues.
We found another example of this divide when we asked about the mood of the California electorate in 2016. Most Republican likely voters (78%) said the state is going in the wrong direction while most Democratic likely voters (67%) said it is going in the right direction in our May PPIC Statewide Survey. We found a similar divide in views about the direction of the US and about whether California and the US are headed into good economic times or bad ones next year.
Similar partisan differences are evident when Californians are asked about gun laws, government regulation, and economic inequality. While 64% of Republicans say the government goes too far regulating guns, 79% of Democrats say it does not do enough. A majority of Republicans—66%—say government regulation does more harm than good, while 76% of Democrats say government regulation is necessary to protect the public. And 68% of Republicans say the government should not be doing more to reduce the gap between the rich and poor, while 79% of Democrats say it should be.