Celebrating good public policy in Michigan

Restoring the Earned Income Tax Credit, part of the bipartisan compromise on road funding approved early today, will be a boost to struggling families across Michigan.

If voters agree to the package, it will put extra dollars into working households where families have the hardest time making ends meet. It’s designed to offset additional costs from an increase in the state sales tax and wholesale gas tax to pay to fix Michigan’s battered roads.

Senate Minority Leader Gretchen Whitmer speaks at the Thursday news conference.

In 2011, the average family received $446 in a state EITC when the credit was 20% of the federal credit. After the EITC was cut to 6%, the average refund plummeted to $138 per family. That’s more than $300 — a big loss to hardworking families.

Gilda Z. Jacobs talks to a reporter at the news conference.

A strong state EITC is key to helping workers pay for transportation and other supports to keep them on the job. It’s a win-win for workers and the state’s economy.

Still it’s not a perfect package, but that is what compromise is all about. It’s unclear what will happen to higher education to fill a $200 million hole if the School Aid Fund can no longer support higher education as part of the ballot proposal.

And sales tax is a regressive tax, meaning that it takes a bigger share of the income of families earning the least than it does of wealthier households. Increasing it to 7 cents puts Michigan about in the middle of the pack of the 50 states when local sales tax (not allowed in Michigan) is factored in. It would match Indiana’s. But the restoration of the EITC helps to soften the regressivity for those earning the least in Michigan.

There’s no doubt in anybody’s mind that Michigan’s roads need repair. An earlier plan approved by the House would have been devastating to school districts and communities by diverting sales tax dollars designated for them.

This is a far, far better option, and a big reason to celebrate good public policy in Michigan.

– Gilda Z. Jacobs

 

Taxing Internet sales as a matter of fairness

Nowadays, with a growing number of people shopping online, it makes sense to collect sales taxes on the items purchased – if the item was bought at a store nearby, we would have to pay the sales tax.

So, what’s the difference? The difference is that over the past year an estimated $482.4 million worth of sales and use taxes from remote sales will go uncollected by the state. The majority (60%) of that is due to e-commerce.

After stalling on the House floor over a year ago, there appears to be support for moving forward with a package of bills (HB 4202-4303), commonly referred to as the “Michigan Main Street Fairness Act,” which would require the collection of the sales and use tax on Internet sales. The bills would not only bring fairness between brick-and-mortar businesses and Internet retailers, but the move modernizes the state’s tax structure to reflect current consumer trends. The Senate on Thursday passed similar bills, SB 658 and 659, on a 21-16 vote, keeping the issue alive in the lame duck session.

Currently, Internet retailers, such as Amazon, have an unfair advantage because consumers can avoid paying the sales tax and end up paying less for goods than they would have in a store. The Michigan Main Street Fairness Act would level the playing field for the state’s brick-and-mortar businesses and improve competition.

Another added benefit the package brings is tax fairness for low-income people in the state. Those who shop online tend to be more affluent  and are not in need of a tax break. Requiring a sales tax to be collected on Internet sales reduces the inherent regressive nature of the sales tax.

Finally, the Michigan Main Street Fairness Act provides much needed revenue in a way that updates the state’s tax structure. Although, it is estimated that the bills will only bring in $50 million – the state could actually collect more if Congress acted on federal legislation – something is better than nothing when it comes to funding already underfunded schools and communities that have undergone a decade of cuts.

In these last days of the legislative session, we urge House lawmakers to support the passage of the Michigan Main Street Fairness Act to provide a level playing field and modernize the state’s tax structure, but not as a way to provide cover for a road funding shell game.

– Alicia Guevara Warren

Moving from mass incarceration to mass education

Michigan needs to spend less on prisons and more on schools.

Between 1986 and 2013, Michigan’s spending on prisons jumped 147% when inflation is counted, according to research by the Center on Budget and Policy Priorities. Meanwhile, per-pupil foundation spending in Michigan remains lower than before the Great Recession began.

“Even as states spend more on corrections, they are underinvesting in educating children and young adults, especially those in high-poverty neighborhoods. At least 30 states (including Michigan) are providing less general funding per student this year for K-12 schools than before the recession, after adjusting for inflation…’’ a recent report by the Center on Budget and Policy Priorities concludes.

Dennis Schrantz of the Michigan Council on Crime and Delinquency and Shaka Senghor of the Atonement Project at the League's recent policy forum.

Just last month, the League sponsored a policy forum on reducing mass incarceration. The upshot of the forum is that Michigan’s unusually long prison sentences mean that more dollars than necessary are being spent on corrections without improving public safety. And students are not getting what they need to avoid the “school to prison” pipeline.

Laura Sager, executive director of the Citizens Alliance on Prisons and Public Spending, spoke about the need for a sentencing commission to examine Michigan’s sentencing structure with an eye on reducing the prison population.

Sager said that mandatory minimums and harsh penalties for drug offenses are not the cause of mass incarceration in Michigan. Unusually long prison sentences drive high costs without providing additional safety, she said. Judges set a minimum and maximum sentence but it is the state Parole Board has the ultimate decision on how much time a prisoner will serve after the minimum sentence is completed.Incarceration also costs $35,000 per inmate per year — more than a year of college at the University of Michigan.

A package of bills by Rep. Joe Haveman, R-Holland, that could see action in lame-duck session next month, is aimed at reducing the time offenders spend in prison and jail. It would require “presumptive parole” for inmates who have served their minimum sentence unless there were “substantial and compelling” reasons to deny parole. The language of the package is still being negotiated, according to CAPPS, but the introduction is a very hopeful step.

Michigan’s parole system has long been criticized for allowing parole board members to pile on additional punishment beyond the judges’ sentences rather than look at the inmate’s prison record.

“The economic health of many low-income neighborhoods, which face disproportionately high incarceration rates, could particularly improve if states reordered their spending in such a way. States could use the freed-up funds in a number of ways, such as expanding access to high-quality preschool, reducing class sizes in high-poverty schools, and revising state funding formulas to invest more in high-poverty neighborhoods,’’ the Center’s report suggests.

Michigan spends $1.2 billion more on corrections in 2013 than it did in 1986, the report found. That’s a lot of money that could be better invested in our students and in our future.

– Judy Putnam

High-quality, affordable child care elusive

Although Michigan has started to address its long-neglected child care system, the state has a long way to go to make high-quality child care affordable and easily accessible, especially for low- and moderate-income working parents.

That is the conclusion of a new report on child care assistance policies. (more…)

Ask Your Candidates

To address our crumbling roads, lawmakers are offering proposals ranging from increasing the sales tax, creating a wholesale tax on gas, raising vehicle registration fees, or diverting current sales tax revenue to road maintenance. Any type of tax increase, especially to the sales tax, will have a disproportionate effect on individuals earning low wages.

Do you support increased or new revenue to address Michigan’s crumbling road and infrastructure? Would you support increasing the Earned Income Tax Credit or other tax credit to help offset the burden on people earning low wages?

Since the 1970s, the federal Earned Income Tax Credit (EITC) has been considered a significant poverty reduction tool that encourages individuals to work. In 2006, Michigan created its own state-level EITC based on 20% of the federal tax credit. The governor and state lawmakers scaled back the EITC to 6% in 2011.

Would you support restoring the state-level EITC to 20% of the federal tax credit?

3 Michigan is one of only seven states that continue to rely on a flat income tax rather than a graduated income tax. States with graduated income tax structures tax at higher rates as income rises making it a more modern and equitable system.

Would you support reforming Michigan’s income tax structure from a flat income tax rate to a graduated one?

Sales taxes are typically considered to be the most regressive type of tax costing individuals earning low wages a larger proportion of their income compared to wealthier individuals. Expanding the sales tax to apply to services can serve to both increase revenue and make the sales tax less regressive. Even still, the sales tax will remain regressive, which is the reason some states offer sales tax credits to provide relief for individuals who earn the least.

Would you support extending the state’s sale tax to services with a sales tax credit for filers with low wages?

The Michigan Homestead Property Tax Credit (HPTC) is a refundable credit available to eligible Michigan residents who pay high property taxes or rent in relation to their income. In 2011, it was eliminated for many middle-class families, veterans, and seniors whose total household resources were over $50,000 or the taxable value on their homes was over $135,000.

Would you support restoring the HPTC to provide relief to moderate-income taxpayers?

6 Out of 16 states offering families additional heating assistance to qualify for additional food benefits, Michigan was one of four that declined to add dollars to keep the program going when the rules changed. That means an average loss of $76 a month in food benefits for 150,000 families. It will take only $3.1 million to pull down $137 million in extra federal food assistance for these Michigan families.

Do you favor spending $3 million in the ‘heat and eat’ option to draw additional food assistance?

Michigan hasn’t adjusted its child care subsidy eligibility since 2003 even though spending has fallen dramatically. As a result, only working families in poverty or living just above poverty qualify.

Should Michigan expand its child care program back to 150 percent (just under $30,000 for a family of three) of poverty?

8 Two recent federal audits found that Michigan child care centers and homes visited without prior notification were not complying with all state licensing requirements related to the health and safety of children, including required criminal record and protective services checks of caregivers. The auditors concluded that the state has too few child care inspectors (known as child care licensing consultants) to ensure adequate oversight of child care homes and centers, with caseload ratios more than three times the recommended ratio of 1:50.

Would you support the appropriation of state funds to increase the number of child care inspectors and improve the state’s ability to oversee compliance with basic health and safety requirements in state law and policy?

9 Children living in families that must rely temporarily on state income assistance live in increasingly deep poverty as a result of the very low payments provided by the state (a maximum of $492 per month for a family of three through the Family Independence Program). Michigan used to provide a one-time payment to all school-age children from families receiving FIP to ensure that children could at least start the school year with a decent set of clothes. Since 2011, the school clothing allowance has been restricted to only those children living with grandparents or other caretakers who do not receive cash assistance.

Would you support the restoration of a school clothing allowance for all school-age children living in families receiving FIP benefits?

10 Over one-third or 35,000 Michigan third- graders did not demonstrate proficiency in reading in 2013. A House bill would require that third-graders who are not proficient in reading as measured by the state test would be required to repeat the grade at least once and no more than twice. Alternate tests and portfolios may be used to document reading skills but the school superintendent would make the final decision. Critics contend research on retention documents a higher likelihood of drop-out for retained students while supporters of retention decry the negative impact of social promotion.

Would you support the retention of Michigan third-graders who are not reading at grade level?

11 Child poverty in Michigan has escalated by almost 40% over the last 25 years. Almost one of every four children in the state lives in a family with income below the poverty level: $19,000 for a family of three and $24,000 for a family of four. Several policy initiatives to alleviate child poverty have been suggested, such as raising the minimum wage to $10.10—closer to its value in the 1960s and indexing it to inflation, reinstating the state Earned Income Tax Credit to 20% of the federal EITC and raising the child care subsidy and eligibility so parents earning low wages can have access to child care.

Would you support any of these initiatives?

12 Dental cavities remain the No.1 chronic disease in children, despite being preventable with proper dental care. In Michigan, 27% of third-graders have untreated disease; in the Detroit area, the percentage increases to 42%. The Healthy Kids Dental program, a partnership between Delta Dental and the state for Medicaid-eligible children, has greatly increased access to dental care for those covered. The program is available in all counties except Kent, Oakland and Wayne.  All Michigan children should have access to this program. The estimated state investment required is about $22 million.

Would you support statewide expansion of Healthy Kids Dental as a priority?

13 Michigan has been a leader in investments in preschool programs for 4-year-olds, but funding for families with infants and toddlers living in poverty or near poverty has declined—despite scientific evidence that the first three years of life are when children’s brains are growing most rapidly, affecting their lifelong development, learning and achievement.

Would you support additional state funds for proven programs for parents of very young children, including home visiting and parenting programs?

14 Michigan currently has nine coal-fired electricity generating units, with health-related costs associated with emissions from these facilities totaling $1.5 billion annually. These health issues range from asthma to cancer, and heart and lung disease, with people of color and those who are economically vulnerable being the most likely to suffer from these health complications.

Would you support transitioning from coal to clean energy sources, such as wind and solar power to reduce pollution and improve the health of Michiganians?

15 Workers who are laid off, or who work in low-paying jobs, can often improve their financial situation by building skills at a community college or university. However, Michigan’s financial aid grants are not available to workers who have been out of high school more than 10 years. There is discussion in the Legislature of reinstating two financial aid grants that were discontinued several years ago that would help older workers go back to school and get a degree (the Adult Part Time Grant and the Educational Opportunity Grant).

Would you support the reinstatement of the Adult Part Time Grant and the Educational Opportunity Grant to help older workers get the skills they need for jobs that will support their families?

 

 

 

 

 

 

 

Small problems get big with misplaced priorities

In kindergarten classrooms in one Michigan school district, work tables are now cleaned only weekly instead of daily due to severe budget cuts that have reduced cleaning staff and supplies. Teachers must buy their own cleaners and wash the tables to maintain sanitary conditions for the youngest students

The dirty tables was one of the anecdotes offered about Michigan’s misguided spending priorities during a news conference held at the Capitol this morning by Priorities Michigan. (more…)

Census numbers tell of stagnancy and slow recovery

Today is the big day that comes each year: the release of American Community Survey figures on income and poverty.

Ready for some numbers?

Michigan’s household median income in 2013 ($48,273) was a bit higher than in 2012, but is nearly $1,000 lower than in 2009. The income bracket that grew the largest from 2009 to 2013 was the share of Michigan households who make under $10,000 a year. The only other income bracket with a significant share increase was households making more than $200,000 a year. These numbers taken together suggest that the slow economic recovery in Michigan is primarily benefiting those at higher incomes. (more…)

Pay Falls for Men Earning Low Wages, Yet Women Far Behind

Over the past 35 years, wages for Michigan’s lowest-paid workers have plummeted (men) or stagnated (women), while wages for the highest-paid workers have increased substantially. Disparity in wage growth – with increases for a relatively small sector of the workforce and declines or stagnation for the vast majority – is one of the most important factors influencing the shrinking of the middle class and the faltering of living standards in the country.

Michigan women have higher rates of postsecondary degrees than their male counterparts, and their wages have increased over the years (particularly for higher-earning women). Yet, Michigan’s gender wage gap is the seventh highest in the country. Women of color and high-earning women are particularly affected.

While in Michigan, men’s earnings fared poorly for the most part and the earnings of women increased only modestly, wage trends in Minnesota tell a different story. Since 1979, median wages decreased only slightly for Minnesota men, and increased substantially for women.

The dramatic differences in wage trends seen in Michigan and Minnesota are in part the result of deindustrialization, which hurt Michigan more than Minnesota. However, these are also the result of different tax and spending strategies: While Michigan has a low flat personal income tax rate and has struggled to adequately fund its public schools, Minnesota is a “tax and spend” state that taxes its wealthy residents at a higher rate and spends more in the education of its workforce. This strategy has helped Minnesota grow its share of the knowledgebased job sector, which pays middle-class wages, much more substantially than Michigan.

 

World class colleges, sluggish financial aid

It is a point of pride among Michiganians that we have great public universities and private colleges.

We have two Top Ten universities that are friendly rivals, and high-quality regional universities. In addition to providing an excellent education for Michigan residents, our universities attract respected scholars and cream-of-the crop students from all over the world. We have a number of widely respected private colleges as well. (more…)

Shooting ourselves in the foot

Michigan and the seven other states that cut unemployment benefits in the wake of the Great Recession caused financial hardship for unemployed workers and failed to boost the overall economic outlooks of the states, a new report from the Economic Policy Institute concludes.

Problems with the unemployment system actually stemmed from underfunding the state trust funds in good times, rather than paying out benefits too generously, the report concludes. And cutting benefits not only shortchanged jobless workers and their families, it undermined the countercyclical role of the unemployment system that is designed to kick in when times are tough. (more…)

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