Michigan no longer among the harshest

Thanks to the state Earned Income Tax Credit, Michigan has gone from being one of the harshest states when it comes to taxing its poor to one of the more moderate states.

The Center on Budget and Policy Priorities has released a state-to-state comparison of the state income tax threshold, the minimum level of household income at which a family or individual must pay income tax. Families with incomes below that level do not have to pay state income tax.

So how has Michigan done? Well, in 1990 a two-parent family of four could have an income as low as 60 percent of the federal poverty line and still pay state income tax, and by 1995, the tax threshold had dropped to 55 percent of the poverty line. However, for most years from 2000 through 2007, the tax threshold for the same family was between 70 percent and 73 percent.

Then, in 2008, the Michigan Earned Income Tax Credit went into effect, which allowed filers to claim 10 percent of the amount of their federal earned income credit amount that year as a state credit. This caused Michigan’s state income tax threshold to jump to 108 percent. Because the threshold was now at more than 100 percent of the poverty line, this meant that Michigan’s working poor families no longer had to pay state income tax.

In 2009, the state Earned Income Tax Credit went from 10 percent to 20 percent of the federal credit, bringing Michigan’s state income tax threshold to 121 percent of the poverty line. Families who three years ago would have had to pay income tax each year are now getting money back as a refundable tax credit. A single parent with two children who earns minimum wage gets a Michigan earned income credit of $545 this year, and a two-parent family of four with similar income gets $701.

So how does Michigan compare to other states in terms of income tax fairness? A few years ago, among the 42 states with income tax, Michigan was in the top five worst (lowest) tax thresholds. It now ranks around 30-32 in most comparisons (minimum wage earners, household income at poverty line, etc.), with 42 being the best. So thanks to the legislators and governor who enacted the state earned income credit, Michigan’s working poor families can look forward to tax season rather than dreading it.

— Peter Ruark

Exemptions, deductions and loopholes, oh my!

It’s budget time again in Michigan and unfortunately, as in previous years, the state is facing a shortfall of close to $2 billion.

There are several options on the table to remedy this situation, and not just in the short term. One of the solutions gaining traction is to end tax expenditures (also commonly referred to as loopholes or incentives) that no longer serve their purpose as discussed in a new League report.

Some lawmakers are supporting the idea of ending ineffective tax expenditures by linking departmental budget bills to their closure, and there is also public support. A recent poll by Epic MRA found that 72 percent support reducing the amount of tax breaks allowed to various corporations and other special interest groups. There is support for using those funds to ensure that important local and state programs can be funded.

Policymakers and residents of the state are coming to realize that tax revenue has a direct impact on how much can be spent. Constantly cutting and eliminating programs is not a solution — real structural reform must occur.

Each year, the amount that Michigan gives away in the form of credits, exemptions, deferrals, or exclusions continues to grow. From 2005 to 2009 tax expenditures grew over 21 percent while total tax revenue actually declined by 5 percent. We are giving more away than we are taking in.

It is becoming clear that if Michigan is serious about getting its fiscal house in order, and investing in education and training programs that prepare workers for a changing economy, we can no longer afford to give away tens of billions of dollars each year ($35.4 billion in fiscal year 2009, approximately four times the state’s entire general fund) in tax breaks that are out of sync with consumer spending or to businesses that fail to create new jobs.

Evaluating tax expenditures and ending some is an important part of a balanced approach to closing the budget gap.

-Jacqui Broughton

78 cents on the dollar

For every dollar a male worker earns, a female worker pulls down just 78 cents.

That depressing fact is brought to you by Equal Pay Day. That’s today. It’s a day set aside to show how far into 2010 women must have worked (in addition to 2009 earnings) to earn what men earned in 2009.

In Michigan, the disparity is worse – women earn just 72 cents for every dollar and the state ranks 43rd in the country.

I recently attended a policy forum on this issue by the Michigan State University Institute for Public Policy and Social Research. The upshot is that decades after the feminist movement began pushing equal pay for equal work there is still a lot of work to do to make the workplace an equal opportunity place for women.

This is a critical issue for low-income families because so many are headed by single women. (See the League’s recent poverty paper for more information.)

Jason Palmer, a state labor market economist, said Michigan’s recent job losses have been concentrated in male-dominated fields (i.e. manufacturing) but the spinoff effect has impacted jobs filled by women.

In fact Michigan’s young women have the largest jobless rate gap compared with the national average. For women 25 to 34 years, 12.7 percent are unemployed in Michigan compared with 8.5 percent nationally.

Palmer reported that Michigan women are out of work four weeks longer than women nationally, and that many Michigan female workers are working part-time, but not by choice.

When race is considered along with gender, the pay gap grows. According to Louise Jezierski, associate professor at Michigan State University’s James Madison College, white non-Hispanic women working full-time, year-round, earned only 70 percent of the wages of white males working full-time and year-round.

But the gap is bigger for women of color. African American women (again working full-time year-round) earned only 64 percent of wages of African American men. For Hispanics, it’s just 56 percent.

Paulette Granberry Russell, who is a special adviser to MSU’s president on diversity issues, said too many girls drop out of high school, one in four, with higher rates for female students of color.

Ironically, women are achieving more than men when it comes to education – more women are enrolled in college than men. But significant numbers choose fields that pay less – picking non-science, non-technology, non-engineering and non-mathematics fields of study.

Granberry Russell’s solution? She says research shows we must address high school dropout rates and do more to encourage women to go into technical fields.

Let’s keep this in mind as debate on a cuts-only budget threatens to further chop funds for every level of education in our struggling state.

— Judy Putnam

Enormous task ahead on health care

With the release of more information and analyses on The Patient Protection and Affordable Care Act (Public Law 111-148), and the Health Care and Education Reconciliation Act of 2010, I am struck by the enormity of the task before us to implement the provision of health care reform.

I am very grateful for the expertise joining us at the Public Policy Forum, Federal Health Care Reform: Challenges for the States, Friday, April 23, sponsored by the Michigan League for Human Services in collaboration with the Michigan Health Insurance Access Advisory Council.

I am sure our speakers will provide valuable information as we seek to implement, in the best possible way, this great opportunity to provide health care coverage to 32 million more Americans, but also limit the financial burden on families while improving the overall system – a daunting task indeed.

I can’t think of a better person to open the policy forum than Ron Pollack, Executive Director, Families USA.  His belief in and commitment to meaningful health care coverage for all Americans has been unwavering and unflappable through all the years and all the turmoil and distraction preceding its passage.

He always kept his eye on the finish line.  For many of us, he was the one to maintain our spirits when things looked particularly bleak earlier this year.  I know he will have great insights to share.

Our afternoon panel, Janet Olszewski, Kevin Seitz, Kris Nicholoff, Ed Wolking and Sister Mary Ellen Howard will provide a broad spectrum of perspectives on the Michigan specific challenges to implementation, from how to expand Medicaid, to insurance implications, to provider challenges, to business challenges, to challenges for those who are uninsured.

I know we all have many questions about health care reform and its impacts, and the policy forum will certainly provide a great opportunity to obtain answers.

I’m hoping to find out how the young adult extension of coverage (to age 26) will be implemented – can any young adult without coverage qualify, will they have to be claimed as dependents on their parents’ income taxes to quality?  Will the Medicaid eligibility maintenance of effort require that the Adult Benefits Waiver be maintained at 62,000 recipients, rather than being reduced to 50,900 as is recommended in the FY2011 budget?

I am also hoping that recent analyses, summary of the law from Kaiser Family Foundation or  Summary of Medicaid, CHIP, and Low-Income Provisions in Health Care Reform from the Center for Children and Families, Georgetown University Health Policy Institute, based on the laws, will stop the dissemination of information that is misleading or an effort to create fear, such as the assertion by some elected officials that “every American will be required to buy health insurance or face jail time.”

Due to the complexity of this issue, I don’t think there can be too much discussion or education on the impacts and implementation issues related to health care reform.

I encourage you to educate yourself by participating in as many conference calls, webinars, or policy forums as your time permits, starting (or continuing) with ours on April 23 at Eagle Eye Golf Club, just north of East Lansing.

Other opportunities include a forum by the Detroit Regional Chamber and a Webinar by Michigan’s Children.

— Jan Hudson

Forum to discuss maternal health

Despite recent reports of improvement in maternal deaths, Michigan has the eighth worst outcomes for maternal health among the 50 states in the nation, according to a report recently released by Amnesty International.

Furthermore African-American women are nearly four times more likely to die of complications from childbirth as white women.

This weekend Detroit will host an event focused on strategies to address this crisis.

The country as a whole also compares poorly to other nations on maternal health outcomes: the USA ranks 41st among other countries.

Women in the USA are five times more likely to die in childbirth than women in Greece, four times more likely than in Germany, and three times those in Spain, according to  the report entitled Deadly Delivery.

Systemic problems – some stemming from discrimination – exist for which there are solutions. As Michigan focuses on strengthening families, it must first ensure that the threat to the health and lives of mothers be substantially reduced. Amnesty International argues that improving these outcomes is not only a public health challenge but a human right.

In the face of these findings, recent legislative decisions to reduce or eliminate funding for several key programs to address maternal health such as family planning, infant mortality reduction, nurse-family partnership, fetal infant mortality review, and local maternal child health interventions could be deemed irresponsible.

— Jane Zehnder-Merrell

Balanced approach lacking

The Michigan Legislature is returning from its two-week spring break this week.  There is much work ahead of them — specifically, the fiscal year 2011 state budget.

Most  budget bills have passed one chamber or the other.  Some contain cuts beyond what the governor recommended.  Some rely on federal money yet to be appropriated.  Some are tie-barred to loophole closure bills that have not passed.

As the Legislature struggles with the challenge of filling a budget  gap of about $1.5 billion, there seems to be little political will or leadership to take a balanced approach.

A balanced approach recognizes the massive cuts that have already been made and tries to minimize future cuts.  Such an approach includes meaningful reforms and also measures to enhance revenue.

A Better Michigan Future, of which the League is a member, has outlined a balanced approach for the Legislature to consider.  The four-prong plan includes closing corporate tax loopholes, auditing state contracts, extending the sales tax to services and implementing a graduated income tax that would benefit 90 percent of Michigan’s tax filers.

We’ve tried a cuts-only budget and we’ve had the luxury of relying on substantial federal funds, but that is not a model we can continue to sustain.  Increasing revenues has to be a key part of a balanced approach for our state.

We hope that lawmakers will see the wisdom and benefits of a balanced approach as they re-engage in the budget process.

— Karen Holcomb-Merrill

Tax Freedom Day flaws

Today is Michigan’s so-called “Tax Freedom Day.”  Tomorrow, it’s “Tax Freedom Day” for the country as a whole.

The somewhat fuzzy thinking behind the Tax Foundation’s designation of Tax Freedom Day is that taxpayers are working to pay the equivalent of their salaries to the local, state and federal governments up until that point in the year, with freedom for the rest of the year to pocket the remainder.

Tomorrow’s designation represents the national average, with some states falling before April 9 and some after.

I should stop right here to point out that Michigan’s so-called Tax Freedom Day is in the middle of the pack among the states. That should help put to bed the flawed notion that our state is a high-tax state. But you can rely on a nonpartisan Michigan Senate Fiscal Agency report to make that point rather than use the Tax Foundation’s questionable methodology.

The Tax Foundation ignores the fact that the money from taxes goes to pay for public schools, fire protection, roads, safe bridges, restaurant inspections, clean beaches and other services we often take for granted.

A bigger flaw in Tax Freedom Day is that many mistakenly think this applies to average Joe Sixpack. It doesn’t.

According to a report by The Center on Budget and Policy Priorities, about 80 percent of U.S. households are estimated to pay federal tax at a lower rate than the Tax Foundation’s estimated “average’’ federal tax burden.

If that makes your head spin, here’s a much more fun way of looking at it from the Minnesota Budget Bites blog by the Minnesota Budget Project.

“Sven and Ole, each of whom earns $50,000, are having lunch at the local coffee shop. Bill Gates walks in, and Sven yells, ‘We’re rich!’ Based on their average income, they’re all millionaires now. But the median income – where half of the people have a higher income and half are lower – is still $50,000, and is the more ‘typical’ income of the three men at the coffee shop.”

So “freedom” for Bill Gates is far later in the year than for Sven and Ole.

On this year’s “Tax Freedom Day,” Michigan families are facing deeper cuts to important services next year (education and public safety for starters) because some in the Legislature have dug in with a cuts-only budget scenario.

We have options – a graduated income tax, sales tax on services, beer tax increase, reduction in the generous exemptions for wealthy seniors, and closure of tax loopholes – that would help buffer the blows and still keep Michigan a relatively moderate tax state.

If we ignore those options, our Tax Freedom Day might as well be renamed the Ax Vital Services Day.

—  Judy Putnam

Busting welfare myths

Last week I attended a press conference that launched a statewide campaign to combat myths about welfare in Michigan.  The campaign is led by the Michigan Department of Human Services and is intended to reduce the widespread negative misperceptions about the welfare system and those who receive assistance.

Given Michigan’s wretched economy, it should be a no-brainer that lots of folks in this state are in need of assistance right now.  Nevertheless, the stereotypes that have persisted over the more that three decades that I’ve been involved in this issue, are still widely held today.

It wasn’t always so.  When the Aid to Families with Dependent Children (AFDC) was created in the 1940s it was viewed as a humane and just way to ensure that widows and their children were not destitute after the husband and father died. Somewhere along the way, attitudes changed as the divorce rate rose and poor women without earnings could not support their children.

At the press conference various speakers talked about how Michigan’s cash assistance and other programs help families meet their basic needs, how the dollars from this program are spent in local communities and help to maintain jobs, and how even the small amount of fraud (yes, it is small) that occurs in the program is aggressively investigated.  The speakers also expressed concern that the public’s negative views of our assistance programs create a powerful stigma that prevents people in need from seeking help.

What wasn’t said at the press conference is that these negative perceptions are not just alive and well with the general public, but with our elected officials as well.  That’s why a mom with two children must be 44 percent below the federal poverty level to qualify for cash assistance.  That’s why the maximum cash assistance grant for this mom and her children is a meager $492 per month—66 percent below the poverty level.  That’s why less than one-third of children in poverty in Michigan are covered by our cash assistance program today, compared with more than two-thirds during the period from 1979 to 1996.

Heaven forbid that we would have done something to strengthen our safety net when the state had the resources.  Yes, we need to educate the public about welfare and encourage people who need help to come forward.  I just wish we had more to offer in the way of a safety net during these extremely difficult times.

— Sharon Parks

Ending Homelessness in Michigan

This week I attended my first meeting with the Michigan Campaign to End Homelessness.   This is not a new initiative,  but the League is new to the Campaign’s State Implementation Group.

Being a part of this Campaign seems like a natural fit for the League as we work to help vulnerable families and populations around the state.  I went into the meeting knowing little about the Campaign, but learned a lot.

There are more than 86,000 homeless people in Michigan, the size of a large city.  Over one-third of the homeless are working poor and nearly 60 percent are female heads of households.

I didn’t know that Michigan is the only state addressing homelessness on a statewide basis.  Every community in our state has a 10-year plan to end homelessness.  These local efforts are coordinated and supported at the state level.

The Campaign’s goal is to end homelessness by 2016.  Certainly a formidable goal.  But I’m learning that there are lots of folks in communities working diligently on this goal.  They include service agencies, faith-based organizations, government entities, local leaders and business leaders.

If you go to the Campaign’s website, you can find the 10-year plan to end homelessness for your community.  I hope you’ll take a look.  In the end, no one should have to sleep on the streets, in a box or in a car.