A 12-year-old Ford Taurus is Paula Fekken’s lifeline. She uses it to get to her job running the mailroom at the Interlochen Center for the Arts, eight miles from her Traverse City home. She also uses it to transport her four boys – ages 8, 11, 15 and 16 – to numerous school activities.
She wants her tax returns to go toward needed repairs on the road-weary Taurus, but an $825 tax increase from the state of Michigan may push that goal out of reach.
“Pretty much all of my money goes to clothing and shoes and basic needs,’’ said Fekken, 42, and newly divorced.
Like many lower-income workers, Fekken is feeling the sticker shock from tax changes made in 2011. That’s when the majority in the Legislature and Gov. Rick Snyder increased taxes on individuals by 23% and cut business taxes by 83%. The big tax shift is just now being felt by working families and seniors as tax returns come in.
A major piece of the tax shift came from chopping the state EITC from 20% of the federal EITC to just 6%. The EITC is a credit for lower-income workers. It is designed to reward work and offset other taxes that cause low-income people to pay a bigger share of their income in taxes such as payroll taxes, sales tax and property taxes.
The Michigan EITC dropped from an average of $439 to $132. For big families, the impact is even greater. Fekken earned just over $26,000. Her state EITC this year is $353 – down from $1,178. That’s a big loss to absorb for families struggling to make ends meet.
Still, she says she has to be careful with every dollar and the reduced EITC will be felt.
“Most of my money goes to food. With the four boys — every little bit helps,’’ she said.
— Judy Putnam