San Francisco Delivers a Local Earned Income Tax Credit

In the eyes of most Americans, San Francisco is a place apart. Wealthy, tech-fueled residents live in fabulously colorful homes, perched on hills with sweeping vistas of ocean, bay and bridge.

Yet even San Francisco faces typical big city challenges. One novel approach from the Bay Area may hold lessons for the rest of urban America.

Chief among the issues confronting San Francisco today are the high costs that tens of thousands of its lower income working families pay to afford basic day-to-day necessities.

The typical two-bedroom apartment in the San Francisco area rents for over $1,500 a month. Full-time childcare in the city can run another $1,000 a month. Families with children in many big cities confront similarly steep costs, and programs to help them meet those expenses—like federal housing vouchers and state childcare subsidies—are frequently oversubscribed.

Working Families Credit
Recognizing these challenges, in 2003, a group of San Francisco workforce and social service organizations proposed that the city create its own version of the Earned Income Tax Credit (EITC).

The EITC is a highly successful federal program that supplements the earnings of low-wage workers through the tax code by up to $4,500 a year. Research has shown that the credit promotes work and reduces poverty. Noting that the City of Denver had funded a local version of the credit in 2002 and 2003, San Francisco leaders thought, “Why not us?”

Thanks to the leadership of Mayor Gavin Newsom, the proposal became reality in 2005 as the city launched the Working Families Credit (WFC).

The WFC provides a local match (10 percent in 2005) to the federal EITC for families with children. The WFC is funded through a unique public-private partnership that draws on public funds, corporate dollars and philanthropic contributions. All players recognize that to be a truly great city, San Francisco should provide opportunities for residents at every income level to succeed in the labor market and care for themselves and their children.

In 2005, the WFC provided an extra $220 on average to the city’s working families. Beyond helping to alleviate the high costs of living in San Francisco, the publicity around the WFC may also help to raise awareness and participation in the federal EITC, thereby boosting family well-being as well as the amount of federal money circulating in local neighborhoods.

In addition, the city and partner financial institutions have used the WFC as a vehicle to help low-income families access basic financial services like bank accounts, helping to put them on firmer financial footing over the long term.

Strong Coalitions
A new analysis published by the Brookings Institution and SFWorks, the city’s leading nonprofit workforce intermediary, provides an overview of the WFC in its first year of operation—from its origins to its preliminary outcomes. The report, “Delivering a Local EITC: Lessons from the San Francisco Working Families Credit,” demonstrates that San Francisco’s experience may hold a number of lessons for other cities searching for ways to help working families within a lean overall budget.

In particular, the WFC experience illustrates the value of having broad-based coalitions participate in the design, debate, implementation and ongoing phases of a new program. Because Mayor Newsom launched the credit as a two-year pilot, the WFC model also offers a built-in opportunity for its constituents to revisit and revise program goals, operations and scale.

In the end, San Francisco’s WFC provides a prime example of how cities are “doing it for themselves” when it comes to addressing the issues facing low-income working families. Even if they cannot copy San Francisco’s inimitable skyline and topography, other cities might consider how this most recent venture—modeled on America’s most successful antipoverty program—could help them meet similar and growing challenges.

For more information on how to promote the federal Earned Income Tax Credit, visit www.nlc.org/nlctoolkit/html/. To learn more about NLC’s family economic success work, contact Abby Hughes Holsclaw at (202) 626-3107 or [email protected].