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

 

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…)

A stronger Michigan economy is within reach

Yes we can grow Michigan’s economy, create good jobs and expand opportunities for all Michiganians with the right public policy decisions. A new report by Erica Williams at the Center on Budget and Policy Priorities outlines how policymakers can make that happen.

Williams explains that states need to invest adequately in education, healthcare, transportation and workforce development. And in order to do that, they need to make decisions about how to raise and spend revenues with an eye toward the future. (more…)

Mich.’s working families pay $247 million more

The numbers are in and they show that the reduction in the Michigan Earned Income Tax Credit from 20% of the federal credit to 6% has resulted in a $247 million tax increase on low-income working families.

Recently released data on the Michigan EITC for tax year 2012 from the Brookings Institution and the Michigan Department of Treasury reveal the actual EITC dollars lost for hardworking Michigan families. (more…)

Cuts to Michigan EITC Raise Taxes on Working Families

Full report in PDF

As a result of the reduction in the Michigan Earned Income Tax Credit, taxes were increased on low-income working families by $247 million in 2012, according to new data from the Michigan Department of Treasury.

One of the most effective tools for supporting working families and reducing poverty—the Michigan EITC—was cut by 70% as a result of major tax changes that took place in 2011. The Michigan Legislature and Gov. Snyder reduced Michigan’s EITC from 20% of the federal EITC to 6%. Most EITC recipients claim the credit only temporarily when a job disruption or other significant event reduces their income. A recent study found that, of people who received the EITC over an 18-year period, 61% received the credit for only one or two years at a time. The EITC has also been shown to have a long-lasting, positive effect on children, helping them do better and go farther in school. The EITC also increases work effort and expands Michigan’s economy.

The EITC provides working families with additional options for housing, child care, and transportation so that the family can remain in the labor force and take steps toward self-sufficiency. Reducing the EITC from 20% to 6% pushed working families into poverty or deeper into poverty.

EITC expansion would keep workers out of poverty

President Obama’s 2015 budget rightly seeks to expand the Earned Income Tax Credit to more workers — particularly childless workers. The current EITC rules are unfair to low-wage workers who aren’t raising children, including noncustodial parents. Those workers receive such a small EITC that they can be literally taxed into poverty, or driven deeper into poverty.

By far, the largest share of the EITC goes to those in poverty who work and have children. The EITC is a refundable credit for low-income working families and has been successful at encouraging certain people to take jobs, particularly single mothers. The EITC promotes work and reduces the need for public assistance. (more…)

Not a pie-in-the-sky idea

From the League’s First Tuesday newsletter
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  • Life is a bowl of cherries.
  • It’s the pits.
  • That’s a pie-in-the sky idea.

My staff and I have been making a lot of cherry puns over the last week. But it’s all for a serious reason.

We used a cherry pie to show what 20% of Michigan families earning the least would get if we roll back the Michigan personal income tax from 4.25% to 3.9%. Yep, that’s just $12 – enough to buy a cherry pie from the bakery. (more…)

EITC is perfect vehicle for the governor

From the League’s First Tuesday newsletter
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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.” (more…)

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