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A Bad Idea Advances in Michigan

We blogged recently that Michigan legislators were considering eliminating the state’s Earned Income Tax Credit to help close a $1.8 billion budget shortfall. Now, a state senator has introduced legislation to do just that.

It’s a short-sighted move — and one that will not help Michigan’s long-declining economy or its working families.  Michigan’s EITC offsets the substantial state and local taxes that Michigan’s low-income working families pay, giving them more money to afford necessities like rent, food, heat, and transportation; that, in turn, boosts the local economy. So, repealing the EITC — which now helps nearly 800,000 working families and individuals — is a bad deal for both the state and its working families.

Eliminating the credit would raise taxes on working families who can least afford it and push some 14,000 children and their families below the poverty line. Families throughout Michigan — in every zip code and every legislative district — would be hit by this tax increase.

This legislation to eliminate the EITC also comes at a time when Gov. Rick Snyder is about to propose a massive tax cut for big businesses that would cost the state $1.5 billion in revenue, exacerbating the budget shortfall. That means the state may cut taxes for big businesses and help finance it by raising taxes on working families.

This would be an unfortunate trade. Years of tax breaks for business in Michigan have not resolved the state’s chronic high unemployment nor revived the state’s declining economy.

One EITC supporter, House Republican Judd Gilbert, explained to the Michigan Information & Research Service its importance to one of his constituents:

“There’s a man in my community who qualifies for the EITC,” Gilbert said. “He earns about $9,640.  I’m pretty sure he’s disabled in some manner, but he does work and earns money.  I believe the only assistance he gets is about $200 a month in food stamps.  He gets about $59 back from the state through the EITC. I’m sure he pays more than that in state taxes over the course of a year.  I’d really hate to take it (the EITC) away from someone like that.”

Michigan has tough choices to make, but it does have choices. Raising taxes on low- and moderate-income Michiganders, whether to balance the budget or give more tax breaks to business, is the wrong way to build for a better future.