Authors: Brian Rakovitis & Madeleine March-Meenagh
Today marks the 16th annual Earned Income Tax Credit (EITC) awareness day. On this day, the IRS calls upon organizations across the country to raise awareness about this crucial federal tax credit. As we bring attention to the federal EITC, we want to raise awareness about Michigan’s own state EITC and the efforts by elected state officials to expand our state credit.
What is the EITC?
The federal EITC was introduced under the Ford administration in 1975. Since then it has been expanded under the Reagan, Bush, and Biden administrations to cover more individuals and increase refund amounts. The EITC has become a vital tool to mitigate poverty by providing up to $6,728 in federal and up to $403 in state fiscal relief to low-income households. Research shows the EITC helps families afford necessities such as food, housing, clothing, school supplies. The credit also promotes economic mobility as families use these funds to pay down debts and increase savings. At an average EITC value of $2,461 per federal income tax return and $150 per state income tax return, Michigan households earned nearly $2 billion last year in state and federal EITC refunds.
State elected officials call for EITC expansion:
Proposals from Gov. Gretchen Whitmer and State Senator Wayne Schmidt would expand the EITC from 6% to 20% and 30%, respectively. The Governor’s proposal would immediately restore the credit to its original level of 20%, while Senator Schmidt’s bill would be a phased expansion over the next three years and would result in the largest EITC ever available to Michiganders. Both of these plans would put hundreds of dollars more into the pockets of hard-working families (approximately $500 under the Whitmer plan or $738 under Schmidt’s). Renewed support for state EITC expansion has been growing on both sides of the aisle and with an anticipated state budget surplus, CEDAM is excited about the possibility to expand the credit.
What can I do to stay informed and help my community today?
One in five Michigan households fails to claim their EITC credit. You can connect your community members with information about the EITC and other essential tax credits by referring them to CEDAM’s MichiganFreeTaxHelp.org.
To stay on top of news about the EITC, we invite you to join the Michigan Economic Impact Coalition (MEIC). The MEIC is dedicated to improving access to free, high-quality income tax preparation assistance and expanding tax credits for working families across the state. Contact Brian Rakovitis for more information.