Want to tackle poverty? Restore the EITC

Added January 25th, 2013 by Yannet Lathrop | Email This Entry Email This Entry
Yannet Lathrop

Today is the seventh annual EITC Awareness Day.

The EITC — Earned Income Tax Credit — is a refundable tax credit available to low- and middle-income families who work and pay other taxes. The EITC helps offset regressive taxes that hit poor families the hardest – such as federal payroll, sales, property, and excise taxes  – and provides much needed relief to low-income families (those earning under 200% of the federal poverty line).

Michigan working families can currently claim two Earned Income Tax Credits: a federal EITC and a state EITC, which is designed to supplement the federal credit. In Michigan, according to the latest available data, one-third of all working families are considered low-income and one in every four children live in poverty (a higher childhood poverty rate than the national average).

Gov. Snyder has stated in the past that reducing childhood poverty is one of the most important goals of his administration. He has his work cut out for him. Since 2005, the state’s childhood poverty rate has only gone up, from a low of 18% to a high of 25%.

Well, governor, meet the EITC.

Among the arsenal of anti-poverty tools at our disposal, the EITC stands out. It has been described as one of the nation’s most effective anti-poverty programs, of particular benefit to children . Despite its anti-poverty efficacy, in 2011 the Michigan Legislature passed changes in the law that decreased the state EITC from 20% to just 6% of the federal EITC, while at the same time cutting tax rates for businesses. That is effectively a 70% tax hike on working families and a big tax break for many big businesses.

Due to these changes, an estimated 9,000 children will fall back into poverty. We hope that in 2013, the Legislature will have a change of heart and the governor will seek a restoration of the state EITC. Low- and middle-income working families and children in Michigan would appreciate it. Information can be found on the IRS website and the Michigan Economic Impact Coalition website.

And for information on free taxpayer help in your community, check Show Me the Money Day events.

— Yannet Lathrop

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