The House Republican plan to fix Michigan’s roads by eliminating the state Earned Income Tax Credit raises taxes for the second time in five years on workers already struggling to get by on low wages.
Eliminating the EITC to pay for roads amounts to robbing poor Peter to pay Paul. The $117 million saved by eliminating the credit is a drop in the bucket of a $1.2 billion transportation plan, but a huge amount to the 820,000 low-income families raising 1 million Michigan children who use the credit to help pay for the very things that keep them working, like transportation and child care.
The Michigan EITC is one of the state’s most effective tools for reducing poverty and building economic security. A new League fact sheet finds that eliminating the state EITC will raise taxes on hard-working taxpayers, who already pay a lot in taxes, and at a time when almost one in every four children lives in poverty.
Cutting the state EITC will only undermine our ability to help families move out of poverty and improve child outcomes in both the short- and long-term.
In 2011, lawmakers cut the credit from 20% of the federal EITC to the current level of 6% — a tax hike of $285 million while at the same time giving large, profitable businesses a $1.65 billion tax break. At the full 20%, the EITC can lift more than 20,000 working families above the poverty line and ease hardship for hundreds of thousands more; at the current 6% it lifts about 7,000 working families above poverty.
Eliminating the state EITC also will harm local economies, with families having less money to spend at local businesses.
Paving the roads on the backs of the lowest earners will ensure that they pay even more of their income in taxes, 9.7%, while the top 1% of earners continue to pay much less – just over 5%. It will result in more families living in poverty with fewer resources to make ends meet. And, the repeal of the state EITC will harm our local economy. All while contributing only a drop in the bucket toward a road solution.
Lawmakers should restore the credit for working families and their kids, not repeal it. Call or email members of the House committee today to oppose House Bill 4609.
— Alicia Guevara Warren