Michigan EITC deal doesn’t cut it for working families or poverty

Michigan’s Lt. Governor Brian Calley, may have emerged from Lansing yesterday feeling very good. He and Governor Rick Snyder reached a deal to restore, in part, Michigan’s Earned Income Tax Credit. Gov. Snyder’s Michigan tax overhaul is a good idea, Michigan’s tax structure handicaps local governments from creating self-sustaining dynamic economies and slows the growth of small business. The way he’s begun his tax overhaul balancing the liability onto working families and seniors is not. Recently, the bureaucratic process is yielding the same results for working families in Michigan; very little gains and more heartache.

Michigan Forward’s testimony sent to the House Committee on Tax Policy and supporters of the Earned Income Tax Credit stress to Michigan legislators the earned income tax credit works. The approach taken by the Snyder/Calley administration to stimulating our economy goes in the wrong direction. The deal struck Wednesday doesn’t provide immediate stimulus for the 13,000 families in Jackson County or the additional thousands of families in urban communities and areas that benefit from the EITC.

This deal assumes a family of three (one parent, two children) making $25,500 annually owns a home, or is maintaining a mortgage on one, and in this case would offer a 80% credit on property tax paid. While home ownership is not impossible for this family of three; many would agree this is not the norm for Michigan’s working families earning $25,500 a year. Maintaining a mortgage is tough for families earning $75,000, common sense can help us imagine the burden on a family of three with a third of the income. The deal cuts the number of eligible filers by adding additional qualifications to EITC filers, while businesses receive less bureaucracy and a flat tax under Governor Snyder’s overhaul of the Michigan Business Tax.

I guess the deal also assumes that the family of three isn’t experiencing any economic hardship, either. Snyder and Calley’s new deal provides a beefy credit of $25 per child, just enough to drive your child to school; for a couple of days.

Lt. Gov Calley & Gov. Snyder

The new plan would provide more than $200 million less in tax credits to Michigan’s working families. Gov. Snyder and Lt. Gov. Calley refer to these cuts as savings in Michigan’s budget. However, Snyder’s tax plan and his deals to accommodates an isolated view of economic revival and is not on par with realistic strategies for economic growth and revival.  In 2010, Michigan provided upwards to $347 million in earned income tax credits to eligible filers. The EITC yields a 67% return on investment for Michigan residents. The fiscal impact of each credit this coupled with the average economic impact of each credit spent ($1.67) should make the case for the EITC to Gov. Snyder.  This equals almost $580 million in economic activity in Michigan. Economic activity is the father of economic revival. Calley’s EITC deal cuts 89% in refunds from the same Michigan working family of three. Wednesday’s deal is a look in the right direction while taking 4 steps in the opposite direction.

Gov. Snyder’s vision for economic revival in Michigan continues to mount more challenges for Michigan residents. Aside from falling population, Michigan leads the nation in another statistic, lost wages. Currently Michigan’s consumer price index rose 1.7% while national wages for urban consumers increased by 0.1%. Michigan’s EITC was created as an economic elevator for working families. As prices for everyday items such as gas, bread and clothes rise more Michigan families will look towards our state’s EITC to help make ends meet. Earned income taxes credits help families hurdle poverty during tough economic times. If prices for goods and services continue to increase, EITC eligilibility should  increase with it. Unlike our state’s unemployment insurance which stabilizes incomes, this credit helps local economies maintain fluidity.

Michigan Forward opposes the deal struck by Lt. Gov. Calley and remains steadfast in supporting our state’s earned income tax credit as is. This credit opens the door working families to climb the economic ladder and support local and state economies. Michigan Forward encourages Gov. Snyder and Lt. Gov. Calley to seek and implement progressive ways to encourage economic participation by all in our state.

For more information on Michigan’s Earned Income Tax Credit visit: http://www.saveoureitc.com.  

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