EITC

In an apparent attempt to pander to voters, the Michigan Legislature is rushing to pass an election year income tax cut. This is a little baffling, because the voters don’t want one.

The state has a budget surplus – on paper, anyway – of a little less than a billion dollars. Two weeks ago, an EPIC-MRA poll found only 11% of the voters thought a tax cut was a good idea. The rest were divided about evenly between those who wanted it to go to schools and those who want it to go to our roads.

Ifmuth / Flickr

Each week we talk Michigan politics with Susan Demas, political analyst for Michigan Information and Research Service, and Ken Sikkema, former Senate Majority Leader and Senior Policy Fellow at Public Sector Consultants. Today we talk about transportation funding. Governor Snyder has called for $1.2 billion to address roads and transportation in Michigan, but there's no agreement in the legislature about how to get the money.

Plus, people are filing taxes and starting to feel the impact of some of the changes in the Michigan tax code, which includes the reduction in the Earned Income Tax Credit. Now a coalition is calling for the EITC to be restored, and Democrats in the House and Senate agree. What's next for the EITC?

And, as the Detroit City Council plans to appeal Governor Snyder’s decision to appointment an emergency financial manager for the city they are doing so without the support of Mayor Dave Bing who says it’s a fight they can’t win. Is he right?

The Michigan League for Human Services is pressuring lawmakers in Michigan who voted last year cut tax credits for working poor families.

The earned income tax credit - or EITC - gives people who would qualify for welfare an incentive to go to work instead. There's a federal credit, and one offered at the state level too. But the state credit was reduced last year in a budget-cutting move.

The reduced tax credit allows families who qualify to claim 6-percent of the federal earned income credit on their 2012 state taxes. In the past, families could claim 20-percent.

Judy Putnam is with the Michigan League for Human Services; a non-profit, non-partisan advocacy group. She says the tax credits boost the economy because poor families spend the money right away.

 "Whereas a business or an upper-income tax payer you know getting tax breaks they don’t automatically go and spend that money,” Putnam said.

The organization has published a report it hopes will convince Republicans to restore the earned income tax credit. The report outlines the legislative districts with the most residents affected by the change. 

Here's the breakdown by state senator's district; while another set here break the data down by state representatives. 

Center on Budget and Policy Priorities

The report was put out by the Center for Budget and Policy Priorities. Its authors write there is "significant room for improvement" in how states tax low-income families. Some of it is inevitable, they write, since states are facing "the most difficult fiscal conditions in decades.":

But a few states have moved significantly backward in this area, raising taxes on low-income working families in order to finance tax cuts that benefit corporations and wealthy individuals.  Michigan, New Jersey, and Wisconsin, for example, have scaled back their EITCs [Earned Income Tax Credits] over the last two years while cutting business taxes, taxes on the wealthiest families, or both.

The Associated Press' Kathy Barks Hoffman wrote about the report. She writes that Michigan's low-income families will lose around $260 million annually next year, while businesses will be getting "a $1.1 billion tax break starting in January and a $1.7 billion tax break the year after":

Michigan Gov. Rick Snyder originally wanted to eliminate the state Earned Income Tax Credit, but agreed to reduce it from 20 percent of the federal credit to 6 percent for tax year 2012. He said earlier this year that the state needed to make cuts to balance the budget and noted no cuts were being made in Medicaid programs providing health care to low-income working families. He also has said the business tax cuts will create employment opportunities.

Cedar Bend Drive / Flickr

Republican state Senator Roger Kahn introduced a bill yesterday that would eliminate the state's Earned Income Tax Credit. The tax credit currently goes to low-income working people in Michigan. The Associated Press reports:

He (Kahn) says the credit is expected to cost the state roughly $370 million in the upcoming fiscal year and the state can't afford it. Many House Republicans also support eliminating the tax credit. The tax credit is staunchly defended by groups including the Michigan League for Human Services and the Michigan Catholic

Conference. They say eliminating the credit would be the equivalent of a tax increase on the working poor.

The state faces a projected $1.8 billion shortfall for the fiscal year that begins October 1st.

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State lawmakers trying to eliminate the Earned Income Tax Credit are hearing from the Catholic Church.

The Michigan Catholic Conference says keeping the credit for the working poor is its top policy goal for this year.

The Conference is the official lobbying arm of the Michigan’s Catholic Dioceses and represents 2.25 million people.

Dave Maluchnik is a spokesperson with the Michigan Catholic Conference.

We have urged members of the House to reconsider their proposal to eliminate the earned income tax credit. There are numerous other groups out there in the state who are very concerned. In fact, there are many protestant organizations, Jewish organizations, that are very interested in protecting this policy.

Lobbying on all sorts of issues will heat up in the coming weeks when Governor Rick Snyder announces his budget priorities for the next fiscal year on February 17th.

Sarah Alvarez - Michigan Radio Newsroom

Some republicans in the Michigan legislature are beginning their push for a repeal of the state's Earned Income Tax Credit (EITC).

It's a credit that bell-weather conservatives, like Gerald Ford and Ronald Reagan, have supported on the federal level.

Library of Congress

The idea of an Earned Income Tax Credit, giving people who have low-income jobs a bit of a tax break, has been around for a while.  In 1975, a Michigan Republican, Gerald Ford, signed the first federal credit into law while he was president.