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The EITC helps the working poor, not people who don’t work

Jun 3, 2015

State Representative Jeff Farrington of Utica wants to pass a bill he says would raise $115 million to fix the roads. That would be a mere drop in the bucket towards the at least $1.3 billion a year needed, but hey, every little bit helps, right?

Well, not really. In fact, Farrington’s bill, HB 4609, would damage the economy and hurt hard-working people who already pay a disproportionate share in taxes. He wants to completely repeal the Earned Income Tax Credit, usually known as the EITC, for working families; something he claims is a subsidy for those who don’t pay income tax in the first place.

Well, it appears that Farrington doesn’t understand what he is talking about. The EITC helps the working poor, not people who don’t work. He also is at odds with the man revered as a saint by nearly all Republicans, former President Ronald Reagan.

Reagan was an enthusiastic supporter of EITC programs. When he signed a bill overhauling the nation’s tax code and creating a federal EITC twenty-nine years ago, he said it meant “millions of working poor will be dropped from the tax rolls altogether.”

Reagan also said his tax bill was “the best job creation program ever to come out of the Congress of the United States.”

Well, Michigan Republicans have apparently forgotten that. Four years ago, as part of a strategy to give corporations a major tax break, they cut the state EITC from 20 percent of the federal tax credit to a mere six percent.

Now, they want to totally get rid of it.

Few people understand better what a mistake that would be than Gilda Jacobs, the CEO of the Michigan League for Public Policy, who previously served eight years in the state senate.

Yesterday, she testified before the House Roads and Economic Development Committee to set the record straight. She told the representatives, “Let’s be clear. The Earned Income Tax Credit can be claimed only by people who work. It is a hand-up for people who are paid low wages, not a handout. If someone doesn’t work and pay taxes, they can’t receive the credit.”

What the EITC does do is lift working families out of poverty. Jacobs said statistics show if it were fully restored, it would lift more than 20,000 Michigan working families out of poverty, and many thousands more.

Even at its current level, it lifts seven thousand families over the poverty line.

These are, by the way, people who already pay a larger proportion of their incomes in taxes than most people.

If the EITC were repealed, taxpayers making less than $34,000 a year would end up paying nearly ten percent of their incomes in state or local taxes. That’s double the percentage paid by the top one percent of earners.

Basically, we’d be hiking taxes on more than eight hundred thousand working families, who among them have more than a million children. This makes no sense.

What this really represents is one more effort to try to come up with money to fix the roads without being willing to raise the revenue to do it.

While that’s probably impossible, repealing the Earned Income Tax Credit might just be the stupidest way to start.

Jack Lessenberry is Michigan Radio's political analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.