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.

The dynamic duo complement one another to boost income, widen the path out of poverty and reduce income inequality.

Michigan has increased the minimum wage modestly, starting with a 75-cent an hour bump on Monday to $8.15 an hour. It will eventually go to $9.25 by 2018.

While a positive move, the motivation behind the increase was to sidestep a popular ballot initiative to take it to $10.10 an hour, index it to inflation, and eventually raise the tipped wage to that level, meaning that waiters and other tipped workers would earn the regular minimum hourly wage from employers, not count on tips to make up the difference. Polls showed the public supported the proposal, which narrowly missed the November ballot.

Michigan could and should do more. The state EITC was slashed from 20% of the federal credit to 6% of the federal credit, starting in 2012. That means that more than 1 million children living in households qualifying for the EITC have less income and more than 15,000 families fell below the poverty line because of that decision.

Restoring the state EITC and raising the minimum wage even more than planned would lift families from poverty, reward work and get our economy moving.

And holy cow! That just makes sense.

– Judy Putnam

 

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…)

EITC Awareness Day

Since the IRS has declared today to be Earned Income Tax Credit Awareness Day, it seems like a good time to let people know about several EITC promotional resources and one policy issue.

First, the Michigan League for Public Policy has posted its 2014 edition of Money Back in Michigan, a packet describing each of the federal and state tax credits available to low-income households in Michigan.  If you work at an organization that serves such populations and you want to be sure they receive the tax credits for which they qualify, you may find this helpful. It includes brochures that can be posted on the wall of your health center, food pantry or social service agency. (more…)

Rolling back progress

The Senate Finance Committee Wednesday approved a bill to reduce the state’s personal income tax rate from 4.25% to 3.9% by 2017, a move that would reduce state revenues by up to $874 million when fully implemented in Fiscal Year 2018.

While the purely political appeal of a tax cut during an election season is obvious, the League testified, based on a recently released report, that the risks to Michigan’s economy far outweigh any benefits. Low- and moderate-income workers will see little in return while the wealthiest taxpayers would benefit the most. (more…)

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