Beyond the headlines of the tax deal

Added December 17th, 2010 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

Whether you love it or hate it, the new tax cut deal reached in Washington does offer some important benefits for low- and moderate-income families in Michigan.

While the debate has raged over tax breaks for the very rich, perhaps lost in the headlines is the inclusion of tax credits for families that were originally enhanced by the American Recovery and Reinvestment Act  of 2009 (also known as the stimulus package).

These credits, originally passed as one-year credits, target people who do important work for low pay, such as nursing home workers, child care workers, janitors and waitresses. As part of the newly inked deal, expansions in the Child Tax Credit and the Earned Income Tax Credit will be extended for two years.

The Child Tax Credit lowered the minimum income amount ($3,000 in tax year 2009 as opposed to $8,500 in tax year 2010) and made other changes. 

Here’s why this is so critical: If the Child Tax Credit had been allowed to expire, it would mean a $1,432.50 tax increase for a single working mom of two in Michigan who is earning minimum wage.  Under the deal, that family will receive a credit of $1,770 (rather than $337.50). That’s a critical boost for those families struggling to make it. That’s also money that is most likely to be spent and spent quickly, giving a needed jolt to the local economy.

The policy group Citizens for Tax Justice (CTJ) estimates that extending the Child Tax Credit expansions will help families of 514,000 children in Michigan.

Likewise, expansions in the Earned Income Tax Credit will help families of a half-million children in Michigan, CTJ estimates. Those changes provided a larger credit for families with three or more children ($629 more than families with two children). The Recovery Act also addressed a “marriage penalty” and allowed a married couple to claim the EITC with incomes $5,000 higher than single taxpayers, rather than $3,000.

In addition, the deal extends tax credits offering help for families struggling to cover the costs of higher education. Of course, there’s also a vital part of the compromise that is extremely important to Michigan and that is the extension through 2011 for emergency unemployment benefits.

With tens of thousands in Michigan losing their benefits each month, it’s important to our state to get that income restored for families as breadwinners look for jobs in a very tough market.

One Response to “Beyond the headlines of the tax deal”

  1. Jenny says:

    Great article Judy! It helped put it in perspective for me when you gave the amount it would help a mother of two. That is a substantial amount for someone with two kids. Thanks for being vigilant on this issue.

Leave a Reply