Military families helped by tax credits

For IMMEDIATE release
Contact: Michigan League for Public Policy Communications Director Judy Putnam at (517) 487-5436

Working family tax credits help Michigan’s military families

LANSING, Mich. – About  40,000 veteran and active-duty military families in Michigan receive the federal Earned Income Tax Credit or the low-income component of the Child Tax Credit, according to a new report from the Washington, DC-based Center on Budget and Policy Priorities.

The report, released in time for the Fourth of July, is a good reminder of the many sacrifices made by men and women in uniform, said state Rep. David Knezek, D-Dearborn Heights, a U.S. Marine Corps veteran who served two tours of duty in Iraq.

“The EITC and CTC tax credits are a proven hand up  — not a handout –  for working families, including those who serve or have served in our military,’’ Knezek said. “As a grateful nation, we are morally obligated to ensure the economic well-being of their families whenever possible.’’ (more…)

2013 Mother’s Day Report: The Federal Earned Income Tax Credit & Child Tax Credit

Full report in PDF

The federal Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) help low-income working parents make ends meet. Only working parents are eligible.

IN MICHIGAN

  • 600,000 working moms rely on these federal tax credits.
  • 847,000 working households rely on the federal EITC.
  • 566,000 working households rely on the federal CTC.

The EITC and CTC Effectively Reduce Child Poverty and Promote Work.

In 2011, the federal EITC and CTC lifted nearly 5 million children out of poverty—and more than 9 million people overall. In 2009, Congress made temporary improvements to these tax credits, and that played a big role. The improvements lifted 1.5 million people, and 800,000 children, out of poverty.

In Michigan, the federal EITC and CTC lifted 120,000 children out of poverty annually between 2009 and 2011.

These credits, and the recent improvements, promote work and reduce the need for welfare. To benefit from the federal EITC and CTC, a family must be working. Research has shown that EITC increases employment and reduces poverty among families with children, particularly single-mother families.

The EITC and CTC help families working hard in low-wage jobs meet basic needs, such as paying the rent and putting food on the table. A single mother who works full time at minimum wage earns about $14,800 per year—about $3,700 below the poverty line for a family of three.

The EITC and CTC help bridge that gap, extending a “hand up” to families who are working hard to provide for their children.

 

IN CONGRESS

U.S. Senators recently introduced the Working Families Tax Relief Act, which makes permanent the 2009 enhancements to the federal Earned Income Tax Credit and the Child Tax Credit. The legislation will allow more moms to take advantage of the federal EITC by simplifying it and lowering the eligibility age.

Cutting the EITC or CTC would increase poverty, harm mothers and hurt America’s economy.

For example, a single mother with two children who earns $14,500 per year would lose almost her entire Child Tax Credit if the 2009 improvements expire; her credit would fall from $1,725 to just $165. For a family struggling to afford basic needs like food and rent, a $1,560 hit would be very difficult.

A married couple with two children earning $25,000 per year would see their federal Earned Income Tax Credit fall by more than $400—and would lose an additional $260 in the Child Tax Credit—if the 2009 improvements expire.

Eleven million families would lose an average of $854 from the expiration of the Child Tax Credits improvements, while 76 million families would lose an average of $532 if the federal Earned Income Tax Credit improvements expire, according to Urban-Brookings Tax Policy Center estimates.

MICHIGAN EITC

States that have a state EITC can further help working families meet basic needs. Michigan has a credit equal to 6% of the federal credit. It helps some 800,000 working families and lifts an estimated 5,000 additional children out of poverty. The state EITC was reduced from 20% of the federal credit. Restoring the state EITC would offer a lot of help to families at a small cost.  

The state EITC is a small investment that makes a big difference for working families.

Claiming all of your tax credits

Michigan League for Public Policy is happy to announce the release of the 2013 edition of Money Back in Michigan.

This packet describes seven state and federal tax credits that are available to lower-income individuals and families, and is used by several hundred agencies and individuals around the state that serve these populations.

We are not happy to announce that this year these individuals and families will be paying higher taxes. This is due to the Michigan Legislature cutting the state Earned Income Tax Credit from 20% of the federal credit to 6%, eliminating the child tax exemption (this will affect all families with children), and restricting the eligibility for claiming the Homestead Property Tax Credit to households with income under $50,000. (more…)

Beyond the headlines of the tax deal

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.

Ouch! Survey results pinch

A recently released survey of local Michigan officials has a depressing finding: Only 1 percent of local officials think the American Recovery and Reinvestment Act has helped improve local economic conditions “very much.” Two out of every three say it has not helped at all to date, and more than half predict it won’t help at all over the long term.

Ouch! That’s a blow for those of us who have been advocating for extending vital features of the ARRA. (Those include extending the enhanced federal Medicaid match that will offer more than $500 million for next year’s state budget, Earned Income Tax Credit expansions, Child Tax Credit to benefit working poor families of nearly 600,000 kids in Michigan and 99 weeks of unemployment benefits for the state’s long-term unemployed.)

ARRA has poured critical dollars into our state at a critical time. Few of those dollars, however, went directly to local governments, a fact pointed out by the Michigan Municipal League in a well-publicized letter to Vice President Biden last year. Local governments struggle with the double whammy of sharply reduced revenue sharing from the state and declining property values, causing layoffs of public safety workers and other hardships.

But the Recovery Act money has flowed to many people in the communities: the unemployed, households on food assistance, those on Social Security and taxpayers. It is credited with saving an estimated 12,000 jobs in Michigan, most of them in education.  That help doesn’t go into a black hole — those are dollars that are quickly circulated in local economies.

The survey of more than 1,000 local officials was completed last fall. Perhaps, with time, more will see the benefit to their communities in projects such as weatherization.

Without doubt, the ARRA has paid off for local communities, even as tough times continue. What’s hard to imagine is how much worse it would be without the Recovery Act.

Michigan needed the Recovery Act in 2009. It needs it now – it’s important that Congress votes to extend the enhanced Medicaid match, EITC expansions, unemployment benefits and the Child Tax credit.

– Judy Putnam