Michigan Earned Income Tax Credit to be Eliminated Under House Plan

[This EITC update is brought to you by Ross Yednock, Director of the Asset Building Policy Project at CEDAM.]

The House Republicans recently unveiled their legislative plan entitled Guiding Principles: Jobs, Reform, Responsible Leadership (PDF). The plan calls for, among other things, more transparency in government spending and contracts, cutting government worker benefits and pay, speeding up permit applications and reviewing current tax credits and exemptions.  Specifically, the plan calls for the elimination of the state Earned Income Tax Credit.

The Asset Building Policy Project (ABPP) at CEDAM joins the Michigan Catholic Conference, the Michigan League for Human Services and others in opposing the elimination of the state EITC.

The state EITC provides critical support for Michigan’s workings families striving to achieve self-sufficiency. It is not a “hand out” or “paying people not to work” as some lawmakers have said. Such comments are gross mischaracterizations of the state EITC and overlook its proven effectiveness in lifting families out of poverty by removing barriers to work and promoting financial independence. Moreover, comments that are at best inadvertently inaccurate, or at worst, deliberately deceitful, hinder real public debate and discourse on the important policy matters that will move Michigan forward.

The state EITC, along with the federal EITC, helps nearly 800,000 Michigan families every year offset the impact that payroll, sales, and other taxes has on their limited budgets. In addition to helping families, both the state and federal EITC provide an economic stimulus to local communities, as these refunds generate new economic activity and help local grocers, day care providers, retailers, banks, credit unions and more stay afloat and keep jobs in the community. Eliminating the state EITC two years since it took effect will hurt Michigan families and make it harder for all of Michigan to move forward.

The House Republican plan also calls for implementing a strict 48 month, lifetime limit for welfare recipients in Michigan. The exemptions to the 48 month, lifetime limit Michigan currently has in place mostly deal with “hardship” and the inability to find work despite looking. As state lawmakers look at this part of the House Republican proposal, the ABPP at CEDAM urges them to also eliminate asset limits for this program, as well. Such a policy discourages financial self-sufficiency and state workers could use the time and resources they spend determining if their client meets asset-tests to actually help their clients use their assets to achieve financial security.

To learn more about the state EITC: