Scrooge and the Budget

Apr 21, 2011

What if the governor increased the amount of Michigan income tax I had to pay by ten dollars a week?  The truth is, I’d barely miss it, and if I went out to eat a little less often, I wouldn’t miss it at all.

I’m not anything close to rich, but fortunately, I manage to make an income adequate for my family’s needs, and don’t have any children who need to go to camp or college.

However, let’s say I was a widower, had two little kids, and was just scraping along as a freelance writer, making fifteen thousand a year. I actually know people like that. In that case, would a tax increase of more than five hundred a year matter?

Frankly, it would be devastating. I cannot imagine making it with two kids on that tiny income, and losing that big a chunk might well topple us off the financial cliff. Yet that is precisely what the governor is proposing to do. He wants to eliminate the Earned Income Tax Credit, which provides a tax refund to the working poor.

These aren’t idle people or welfare chiselers, but people who work but don’t make much money. Economists have told me that this tax credit makes a great deal of sense for a number of reasons. It enables families to stay together and keep their heads above water.

It stimulates the local economy as few other credits do, because those getting the refund tend to spend it almost immediately, and locally. They buy food and school supplies with it, or pay the electric and gas bills. Last year, the average family getting such a tax credit got an average refund of $432 dollars.

Well, there’s no need to guess how essential this was. We are about to find out what life is like without it.

The Snyder administration believes strongly in eliminating all tax credits for rich and poor alike, and so the EITC, like the film tax credit, is slated for extinction. Yesterday, Lt. Governor Brian Calley said in compensation the state would give the working poor a $25 per child tax credit instead.

That means that instead of getting a tax refund of $533 dollars, my poor writer with two kids will get back fifty bucks.

That doesn’t much impress Gilda Jacobs, a former state senator who now runs the non-partisan Michigan League for Human Services. She said these changes will still drive thousands of children into poverty.

Most unjust of all, she added, was that “working poor families will be asked to pay a bigger share of their income than higher-income families in order for businesses to enjoy a big tax cut.”

You don’t have to be a Bolshevik to see something wrong with this picture. Governor Snyder’s idea of a level playing field makes  sense. But he may be forgetting that Michigan, unlike the federal government, has no graduated income tax.

There are a lot of people who need help just getting to the playing field. America has never had real class warfare because all classes have believed they had a shot at making it here.

The tragedy is that repealing the Earned Income Tax Credit seems certain to take some of that chance away.