California needs to be more responsible with our money – Orange County Register

The fraud in unemployment claims in California now reportedly totals as much as $4 billion.

That’s the latest number, according to sources who spoke to the Los Angeles Times. Earlier reports had the total fraud estimated at $2 billion, including a staggering amount of fraudulent claims paid out to people who are currently incarcerated in California as well as in other states.

This is a cautionary tale for California, which is about to embark on another expansion of another benefits program, the state Earned Income Tax Credit.

The CalEITC differs from unemployment benefits in that it’s paid by all taxpayers, while unemployment benefits are paid by employers. But the two programs are similar in one important way: People who fill out a form and give specific answers will receive money from the government.

The federal government has had an Earned Income Tax Credit for many years, and it has repeatedly been listed by government budget watchdogs as one of the programs “at high risk for improper payments.” According to the Treasury Department Inspector General, “The IRS estimates 25.3 percent ($17.4 billion) of the total EITC payments of $68.7 billion made in Fiscal Year 2019 were improper.”

In a report issued on April 30, 2020, the inspector general said its latest audit was initiated to assess the IRS’s compliance with the requirements of the Improper Payments Elimination and Recovery Improvement Act of 2010, as well as Executive Order 13520 on Reducing Improper Payments, and also the Improper Payments Elimination and Recovery Improvement Act of 2012. It’s a stubborn problem.

The inspector general’s audit found that improper payment reporting has improved, but there has been “no significant reductions to the billions of dollars of improper payments.”

What does this mean for California? At the very least, it means the CalEITC program should have oversight and safeguards in place to prevent and detect fraud.

California lawmakers first passed a state Earned Income Tax Credit in 2015. According to, about 500,000 California households were eligible to receive payments under the original program. Two years later, eligibility for the EITC was expanded, and in 2019, nearly 3.9 million tax returns claimed the CalEITC.

The EITC is a refundable tax credit, which means it is paid as a tax refund even if the tax filer paid no income taxes at all during the year. In that sense, it’s not a refund, it’s a welfare payment. The money comes from the funds in the Treasury, money that was paid by other people. It’s a redistribution of wealth.

In 2019, a married taxpayer filing jointly, with three children, reporting $19,000 in income, would have qualified for a federal EITC of $6,557 and a California EITC of $354, according to an online calculator at

In September, Gov. Gavin Newsom signed a law that expanded the CalEITC again, this time eliminating the requirement that applicants must have Social Security numbers. Now, Californians who file tax returns with an ITIN — an Individual Taxpayer Identification Number — are eligible to receive the state payment.

At one time, the federal EITC was available to people who filed tax returns with ITINs, but no longer. The IRS now requires filers and their eligible children to have Social Security numbers.

The IRS issues ITINs to undocumented workers so they can file tax returns. An ITIN can’t be used to get a job, because it’s not an authorization to work in the United States. It’s only for filing taxes and claiming tax credits.

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California needs to be more responsible with our money – Orange County Register

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