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