Young but not invincible: Young adults rely on credits too

When I graduated law school in 2008, I got rejection letter after rejection letter. I applied for every job you could imagine – part time, full time, hourly, salaried – the jobs just weren’t there. I eventually landed in a great office, but many millennials–those born between 1981 and 1997—who were just graduating high school, college, or from graduate programs, weren’t so lucky.

The job market was the worst in decades – record high unemployment rates, collapse of the Big Three, and the bursting of the housing bubble made jobs scarce. Census comparisons released at the end of last year showed that millennials have lower median earnings and are living in poverty at a higher percentage than their parents were at the same age, despite having a higher percentage of the population with postsecondary education. Additionally, millennials are more burdened with student debt than previous generations. The economic downturn resulted in a record high percentage of young adults moving back in with their parents.

This is precisely why young people should care about the Earned Income Tax Credit and the Child Tax Credit. The EITC is a refundable tax credit intended to at least partially offset federal payroll taxes of low- to moderate-income working taxpayers. The credit amount varies depending on marital status, number of dependent children, and annual income. The Child Tax Credit, which intends to reduce the cost of child rearing, provides a $1,000 credit per eligible child and may be partially refundable. According to the latest data, more than 800,000 taxpayers in Michigan received the EITC and more than 525,000 received the refundable portion of the CTC in 2013. These tax credits encourage work, help lift families out of poverty, and improve the lives of children.

According to a recent report from the Center on Budget and Policy Priorities, 13.9 million millennials nationwide received the EITC, refundable part of the CTC, or both in 2012. The credits averaged $2,200 and $1,300, respectively. Michigan had the 10th highest number of recipients among all states and Washington DC at 393,000. Nationwide, the EITC and CTC together helped keep 1.8 million millennials, and their 1.9 million children, out of poverty.

Expansions enacted in 2009 and later extended, boosted both the EITC and CTC, allowing more individuals to qualify and providing for greater tax relief. However, these expansions are set to expire at the end of 2017. If we allow these to lapse, 6.3 million young people, including 195,000 in Michigan, will lose all or part of their EITC or CTC, pushing about two-thirds of them into or deeper into poverty.

The good news is that many proposals recommend keeping the EITC and CTC as they are currently structured and some recommend expanding the EITC. Interestingly, President Obama and Congressman Ryan have similar proposals to expand the EITC for more childless workers. This would disproportionately benefit young workers, who are waiting longer to get married or have kids than previous generations.

The Great Recession was hard on a lot of people, and while we are recovering, we haven’t fully recovered. Extending and expanding the EITC and the CTC is just good policy. Congress should move sooner on these provisions, to provide certainty and stability, instead of waiting until the last minute.

– Rachel Richards

 

Graduated Income Tax: Making our system fairer while raising needed funds

As the issue of “tax fairness” continues to arise and the state faces a significant budget shortfall, perhaps it’s time to seriously consider changing Michigan’s income tax structure. Michigan is one of only eight states with a flat income tax rate, and, because of this structure, low-income taxpayers pay the 9th highest personal income taxes for their group in the country, while the top 1% actually pay at a slightly lower rate than their counterparts in other states. A graduated income tax structure, where those who earn more would pay more, makes the income tax system fairer and generates new funds. (more…)

Voting yes on Proposal 1 is voting to improve our communities

We all agree that we need better roads in Michigan, but we don’t agree on how we pay for them. With the various strains on the state budget, including a shortfall due to outstanding business tax credits and an increasingly overreliance on federal funds, it’s hard to imagine a proposal that fixes our roads, invests in our schools and local communities, and protects Michigan’s lowest earners.

Vote yes on Proposal 1 to once and for all guarantee funding for safer roads

Proposal 1 meets these objectives while any “Plan B” likely would increase road funding at the detriment of our schools, communities and vulnerable families.

Next Tuesday, voters will decide whether to back Proposal 1, a comprehensive, bipartisan plan or to take a chance with the new Legislature. There is a lot of frustration surrounding Proposal 1 for several reasons. Some people say “it’s too complicated” or “the Legislature punted the issue.” Yes, it is complicated and for good reason: A long-term, structural fix to fund our roads into the future has a lot of moving pieces that must be addressed. It can’t be simple.

But no, legislators did not punt the issue. They devised this plan that must be approved by voters. Raising Michigan’s sales tax requires a ballot proposal.

While Proposal 1 may not be perfect—no policy is—this is pretty good, and quite possibly, the best solution to all of our problems. Proposal 1 contains many benefits:

    • It removes the sales tax from gas purchases while increasing the gas tax to ensure that all of our taxes paid on gas go to support the roads.
    • It changes our flat tax rate to one based on the wholesale cost of gas helping it keep up with inflation so that the tax doesn’t lose its purchasing power and making funds more stable in the long-run.
    • Eliminating the sales tax on gas, which primarily supports schools and communities, means the sales tax must be increased to prevent cuts to schools and local governments.
    • Increasing the sales tax has the potential to hit the lowest earners the most; therefore, with the passage of Proposal 1, the state’s Earned Income Tax Credit would significantly increase from 6% to 20% to help offset the sales tax increase.

The Legislature has given the public a voice in deciding how to fund improvements to our quickly deteriorating and unsafe roads. We cannot sacrifice the possible for the perfect. Every day we wait to find a road funding solution, the costs go up for taxpayers.

Support for Proposal 1 is support for better roads, better schools, and better local communities to create a state where people will want to live, work, and play.

– Alicia Guevara Warren

 

 

Promoting Early Literacy in Michigan

 

We all can agree that children should be provided the supports they need to become literate by the end of the third grade. Most students who fail to reach this critical milestone fall further behind and often drop out before earning a high school diploma. Low-income students are at higher risk of low literacy skills than their peers from higher-income families and well-resourced schools.

INVEST: States that have seen the most dramatic improvements in early literacy have made substantial investments in early interventions. Without additional funding, schools with large numbers of disadvantaged students are hampered in their efforts. For example, the substantial gains in reading proficiency among Florida students were aided by $165 million to support reading specialists and summer programs.

CURRENT SITUATION IN MICHIGAN: Roughly 40,000 of the state’s third-graders did not demonstrate proficiency in MEAP reading in 2013, and 10,000 of those had scores at the most elementary level (4)—NOT proficient.

 

EARLY INTERVENTION IS PREVENTION: Let’s begin by strengthening existing systems for maternal and infant health, child lead poisoning prevention, early intervention for children with disabilities or developmental delays and improved access to subsidized high quality child care. Expanded access to preschool for 3-year-olds and dental care for Medicaid-eligible children would also enhance readiness.

POVERTY: The clear connection between poverty and academic achievement must be addressed. Raising the state Earned Income Tax Credit and strengthening family supports will improve achievement. Parents in low-wage jobs with minimal benefits need family-friendly policies at work and in government programs.

 

Child poverty in the 21st century

The number of Michigan children living in families with income below the poverty level drops by half when tax and non-cash benefits are included as income, according to the latest analysis from the national KIDS COUNT project at the Annie E. Casey Foundation.

The percentage of the state’s children who would be living in poverty if no government program benefits and tax credits were available, however, stood at 30 percent, as calculated by the Supplemental Poverty Measure. (more…)

‘Yes’ on road funding is right direction

From the League’s First Tuesday newsletter
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It’s a pivotal time for Michigan public policy. Decisions made in the next few months will determine the path Michigan takes into the future.

In three short months, voters on May 5 will decide Proposal 1, the road funding package. There’s no doubt that this is Michigan’s single best chance to raise sorely needed money to pay for road repairs and put new dollars into school classrooms all while protecting families earning the least. (more…)

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. (more…)

Oh Michigan!

From the First Tuesday newsletter
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‘O’ stands for October — and it also stands for Opportunity.

With just a few short weeks before the Nov. 4 election, now is your best chance as a concerned Michigan citizen to make a difference. (more…)

Holy smoke Batman! We can reduce poverty

Like Batman and Robin, raising the state Earned Income Tax Credit and minimum wage are best when working together, a new report concludes.

The two strategies are better than one, according to State Income Taxes and Minimum Wages Work Best Together, by the Center on Budget and Policy Priorities. (more…)

If there’s a will, there’s a way

A new video and visually engaging report out today strongly makes the case for rebuilding the state’s education system, protecting Michigan’s abundant natural resources and investing in roads and our communities.

The project is called The Michigan Dream at Risk, from the Michigan Economic Center, an affiliate of Prima Civitas, a nonprofit organization that works to create resilient, adaptable communities in Michigan.

Gilda Z. Jacobs, the League’s president and CEO, and board members Charley Ballard and Bob Kleine were interviewed for the project. (more…)

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