Save the EITC!

Added July 8th, 2015 by Gilda Z. Jacobs | Email This Entry Email This Entry
Gilda Z. Jacobs

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One of the state’s most effective tools for reducing poverty and building economic security is in jeopardy. House Republicans, led by Speaker Cotter, want to eliminate the Michigan Earned Income Tax Credit, effectively raising taxes on 780,500 low-income working families raising 1 million children.

The House in June voted to eliminate it as part of the House GOP plan to fix Michigan’s roads. The $117 million saved from ending the state EITC is a drop in the bucket of a $1.2 billion roads plan. We are grateful to the Democrats and these five Republicans who voted against the bill: Reps. John Bizon of Battle Creek, Thomas Hooker of Byron Center, Martin Howrylak of Troy, Holly Hughes of Montague, and Brandt Iden of Kalamazoo.

Fortunately, the Senate roads plan passed last week did not include elimination of the EITC. A new poll of Michigan voters shows strong support for the EITC, with two-thirds opposed to eliminating it. However, it remains in play and a real possibility that we must fight against.

Many of the families who receive the EITC are on the brink of poverty and removing this credit will push them over the edge. In fact, the average EITC user has a median income of $17,725 a year, but average basic expenses of $24,434.

The average credit of $140 can go a long way toward helping ends meet and helping people continue to work. According to our friends at the Community Economic Development Association of Michigan, the average credit can buy 14 hours of child care, 52 gallons of gas or make a car payment.

Ending the state EITC makes no sense for anyone – not the families scraping to get by on low wages, not the state, which benefits from having fewer people in poverty, and not local businesses that benefit from the economic stimulus of recipients spending the credit in their communities.

From a tax fairness standpoint, households eligible for the tax credit already pay a greater share of their income in state and local taxes than wealthy people. Eliminating the EITC will raise recipients’ tax liability to double that of the top 1% and among the highest of any tax bracket. Those making less than $17,000 and those between $17,000 and $34,000 will be paying almost 10% of their incomes in total state and local taxes. The top 1% pays 5%.

Some critics have mistakenly labeled the EITC as a subsidy. The funny thing about income tax credits is that you must have income to receive them. It’s pretty simple: If you don’t work, you don’t have income and cannot get an income tax credit.

Another point they make is that the credit allows some people to avoid paying any taxes. They fail to mention that those people are living in extreme poverty. For tax year 2013, approximately 25% of EITC recipients had no Michigan liability (around 194,000 returns). But, their gross income was below $11,850 for a family of three and the average adjusted gross income was about $9,800. Are we really going to take more money from people who are among the poorest in our state?

We sometimes forget that the economic recovery clearly has not spread to everyone yet. One in four Michigan children lives in poverty. Too many families continue to struggle to make ends meet, and now is not the time to pull the rug out from them and make life harder.

Ending the state tax credit undermines our ability to keep families and children out of poverty, costing us all more in the long run with greater reliance on public assistance, poorer academic performance, higher rates of child abuse and neglect, and increased odds of incarceration and poor health. It’s just bad policy all around.

Please help us fight against the threat and save the EITC. Call, email or write to your senator or representative and tell them you support the EITC.

— Gilda Z. Jacobs

 

5 Responses to “Save the EITC!”

  1. […] much attention has been focused recently on protecting the Michigan Earned Income Tax Credit (EITC), there is equally urgent action needed in Washington to save critical pieces of the federal EITC […]

  2. […] Click on these blog links for more information on the League’s efforts to protect the state and federal EITC and the CTC: Michigan families need federal action on EITC, CTC; Save the Michigan EITC. […]

  3. […] There are some obvious places to start including the protection and expansion of the state’s Earned Income Tax Credit—a proven anti-poverty tool, investments in child care and other supports parents need to work, […]

  4. […] test on state assistance and a law tying school truancy to assistance as well as promoting the protection of the Michigan Earned Income Tax Credit and the extension of the federal Earned Income Tax Credit and Child Tax […]

  5. […] families, are simply dodging defeat. Over the course of road funding negotiations last year, elimination of the state Earned Income Tax Credit (EITC) that helps 780,500 low-income working families raising 1 million children make ends meet was […]

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