September 30, 2022
Yesterday, Governor Gavin Newsom signed the Workers Tax Credit into law, a major victory for worker advocates including United Domestic Workers of America (UDW/AFSCME 3930), which represents 155,000 home care and family child care workers in California. This historic new benefit establishes the framework for a refundable tax credit for a portion of union dues, allowing workers in low-wage industries to receive the benefits of the tax credit.
While union dues are deductible as an itemized expense on state returns, many workers do not earn enough to itemize and therefore cannot deduct them. Meanwhile, higher-income professionals can write off a wide range of business-related expenses, including association fees. The Workers Tax Credit allows a wide range of workers to receive a tax credit even if they cannot itemize deductions or have no tax liability.
“UDW fought for the Workers Tax Credit to bring tax equity to working-class Californians,” said Doug Moore, Executive Director of UDW. “This victory will help ensure that our middle- and lower-income worker members – who are predominantly women – enjoy the same benefits available to those in higher tax brackets.”
The tax credit applies to workers who do not already utilize the union dues deduction. Eligible workers will receive a minimum of $100, and no worker may receive more than they paid in dues for that year. The program complements recent tax policies benefitting low-wage workers and families, including the Earned Income Tax Credit (EITC), Child Tax Credit, and Golden State Stimulus, and will encourage more workers to file taxes.
“The Workers Tax Credit gives union workers a tax break similar to what businesses have used for years, and it helps in the ongoing efforts to improve conditions and increase equity for all employees,” said Senate President pro Tempore Toni G. Atkins (D-San Diego), who championed the effort in the Legislature. “That’s the same kind of win-win we’ve seen with the Earned Income Tax Credit and other credits we’ve passed. I congratulate UDW for leading the effort to advance this historic bill, and I thank Governor Newsom for signing it into law.”
“I want to give UDW a nod for advancing this idea and thank my legislative colleagues for their commitment to its passage,” said Assembly Speaker Anthony Rendon. “The Assembly is always behind efforts to improve and protect the status of California’s workers and we welcome the Governor’s support for our legislative actions.”
“Any opportunity we have to uplift workers is an opportunity we must act on to the best of our abilities,” said Assembly Majority Leader Eloise Gómez Reyes. “By providing reimbursement through this tax credit, we are doubling down on our commitment to California’s working families. I want to thank UDW for uplifting the needs of our workers and I applaud Speaker Rendon and Senate President pro Tem Atkins for leading on this important effort.”
“We’re glad to finally see a tax credit that rewards hardworking union members who don’t get to enjoy the countless tax benefits available to the wealthy and well-connected,” said Lorena Gonzalez Fletcher, leader of the California Labor Federation. “The bill creates a refundable tax credit that’s available to union members across the public and private sector — this is a real step toward tax fairness.”
Unions provide significant public benefits, including expanded access to healthcare and retirement, a narrowing of race and gender wage disparities and racial wealth gaps, and a path out of poverty through job security. As working-class Californians face growing economic inequity, union membership is more important than ever before. Yet, workers who belong to unions have been unable to enjoy the tax benefits available to the wealthy and other higher paying professions.
The Trump Tax Cuts and Jobs Act of 2017 suspended the tax deduction for union dues at the federal level even though large corporations and other businesses can access over tens of billions in tax incentives. The Workers Tax Credit remedies this inequity by ensuring that union employees have access to the same tax benefits as lawyers, doctors and other professionals who pay into their associations. “Many workers don’t earn enough to itemize our taxes, and we miss out on tax credits that higher-paid professionals and corporations take advantage of,” said Catherine Louie, a home care provider and UDW member in Orange County. “This tax credit helps level the playing field for working-class Californians like me.”
The California Department of Social Services (CDSS) will be implementing a change to the IHSS Electronic Visit Verification (EVV) system beginning July 1, 2023.
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