EITC is perfect vehicle for the governor

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Gov. Rick Snyder unveils his fourth executive budget Wednesday and worthy of applause is the fact that he has rejected the across-the-board rollback of Michigan’s personal income tax.

The governor indicated in his State of the State address last month that he wants a tax cut but one that is targeted to working families — those “hardworking Michiganders who get up every day and pack their lunch and go to work.”

The good news is that there is a vehicle already in place to deliver exactly what the governor is seeking: the Michigan Earned Income Tax Credit. As a new fact sheet from the League shows, the tax credit is one of Michigan’s most effective tools for supporting working families and reducing poverty.

Using the $100 million the Snyder administration has targeted for tax relief to increase the EITC would help the very workers the governor wants to help, and it would boost the economy. That could lift the EITC from 6% of the federal credit to 11% of the federal credit. For a working mom with four growing boys, like Paula Fekken of Traverse City, that would mean $300 more for car repairs and other necessities to keep her on the job.

A new report by the Center on Budget and Policy Priorities documents the benefits from state EITCs: They keep working parents on the job and children out of poverty.

Unfortunately, the income tax rollback is gathering steam in the Legislature with a Senate hearing. The tax cut fever is driven by higher-than-expected revenues, nearly $1 billion over three years. It’s a strong election-year temptation as GOP lawmakers look to defend their records for the damage done to working families and seniors in the Big Tax Shift of 2011.

Yet, as the League testified at the Senate hearing last month the income tax rollback disproportionately benefits upper-income households and threatens Michigan’s fragile recovery. In fact, $3 of every $5 would go to those in the top 20% of income.

Increasing the EITC or spending the higher-than-expected revenue to begin restoring Great Recession cuts to education and other key services would also be better economy-boosting routes than the across-the-board income tax cuts.

Either choice would help the governor reward hard-working folks in Michigan.

– Gilda Z. Jacobs

Rolling back progress

The Senate Finance Committee Wednesday approved a bill to reduce the state’s personal income tax rate from 4.25% to 3.9% by 2017, a move that would reduce state revenues by up to $874 million when fully implemented in Fiscal Year 2018.

While the purely political appeal of a tax cut during an election season is obvious, the League testified, based on a recently released report, that the risks to Michigan’s economy far outweigh any benefits. Low- and moderate-income workers will see little in return while the wealthiest taxpayers would benefit the most. (more…)

Tax cuts won’t grow the economy

A new report by the League demonstrates that across-the-board cuts in the state’s personal income tax would not boost Michigan’s economy, but could affect long-term prosperity by locking in cuts in funding for public schools, community colleges, universities, health care and public safety—the very services that fuel economic growth.

Despite the claims of several legislative leaders advocating for a tax cut, there is no evidence that income tax cuts generate good jobs or economic growth. In fact, a study of 65 years of data by the Congressional Research Service found that top income tax rates have had no discernible impact on economic growth, and states that cut taxes the most during the 1990s and 2000s saw their economies fall behind in job creation, as well as production and income growth. (more…)

Making Michigan a true comeback state

You may be hearing a lot about “surplus” revenue as the state budget season kicks off – and more importantly, how to spend it.

Last week, the House Fiscal Agency, Senate Fiscal Agency and Michigan Department of Treasury, put their heads together to give a new prediction. The upshot — nearly $1 billion more than expected. It would have been higher, but Treasury gave a very conservative estimate of $700,000 in unexpected revenue for the three years — the 2013 fiscal year that ended Sept. 30, the 2014 fiscal year that started Oct. 1 and Fiscal Year 2015. (more…)

Healthy Michigan Plan moves forward

Great news to start the year! The federal government Monday approved Michigan’s request to expand Medicaid eligibility through a new program, the Healthy Michigan Plan.

This action brings Michigan one step closer to providing comprehensive coverage to Michigan’s low-income, uninsured residents.

It has been a long, tough road to get to this point. (more…)

The kids are not all right

Whatever economic recovery has occurred in Michigan, it has not reached children and their families. Poverty continues to affect one of every four of the state’s youngsters. Over half a million of the children in Michigan lived in families with income below the federal poverty level ($18,000 for a single parent family of 3 and $22,000 for a family of four), according to this year’s annual Kids Count in Michigan overview of child well-being.

Economic security weakened in almost every county between 2005 and 2011, and the more affluent counties experienced the steepest increases: Oakland, Ottawa and Macomb counties saw their child poverty rates almost double over the trend period. (more…)

Walking the walk with infant mortality

Factors that may drive Michigan’s tragically high infant mortality rate include stress, unemployment, poverty and neighborhood safety in addition to what might be thought of as the more traditional reasons, such as lack of healthcare or poor safe sleep practices, according to a new report from the Michigan Department of Community Health. The report takes a broad look at why Michigan’s rate is so high and in particular why an African American infant in Michigan is 2.6 more times likely to die before reaching the child’s first birthday than a white infant. (more…)

Ten steps to boost Michigan’s economy

new report by the League outlines 10 steps Michigan must take to improve its economy, refuting the myth that tax cuts are a shortcut to economic prosperity. Included in the report are strategies for investing in the services and infrastructure needed to create jobs and fuel economic growth, as well as tax changes that modernize and strengthen the state’s revenue system.

It is an agenda for long-term economic prosperity that includes investments in education from early childhood through higher education, access to the health and mental health services needed for a healthy workforce, basic income security for those who cannot work or find jobs, and support for the community services businesses and consumers rely on. (more…)

Two steps forward….

From the First Tuesday newsletter
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Tuesday marked two beginnings: The start of a new state budget year and the launch of the enrollment period for the Health Insurance Marketplace — all while the specter of a federal shutdown begins.

The Oct. 1 start of the state fiscal year represents our big opportunity to address inequities, close gaps and set the investments for the future of Michigan. The new budget has a mixed record in that regard. To be applauded is the impressive bipartisan effort, led by Gov. Rick Snyder, to expand Medicaid in our state. As a result, we will be able to pay for the medical care of hundreds of thousands of uninsured adults in Michigan using available federal dollars. (more…)

Moving in the wrong direction

The latest U.S. Census Bureau data confirms what we all suspected. While there have been improvements in the economy, it has not been enough to float all boats, and state poverty rates, especially for children, remain 25% to 30% above pre-recession levels.

Certainly there have been cuts in state and local services in Michigan that affected low-income families with children, thwarting their opportunities to share in the American dream by earning enough through hard work to move into the middle class. Deep cuts in basic income assistance have forced more children into extreme poverty, exposing them to homelessness and hunger, and creating barriers to academic success. A failure to invest in child care for low-income families has resulted in fewer parents having the care they need to secure and retain jobs that support their children. (more…)

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