What’s next for the earned income tax credit in Michigan? Lawmakers say we'll find out next year.
When Michigan lawmakers adjourned this week, they left many priorities sitting on the table. That includes an expansion of the Earned Income Tax Credit.
The federal credit offers tax breaks depending on income-level and number of dependents.
Michigan offers its own version, using a percentage of that amount. Supporters would like to see it grow.
Senator-elect Sam Singh (D-East Lansing) will serve as majority floor leader next term. He said it remains an important priority to get done.
“Many of our candidates ran on providing this type of tax relief, specifically for those who are in working class families. And so, I believe as part of the budget conversations as we head into next year’s budget, we’ll be talking about providing tax relief, through the EITC,” Singh said.
Qualifying Michigan residents can currently claim a credit worth 6% of the federal amount on their taxes. That number used to be 20% but was slashed as part of tax cuts passed in 2011 under then-Gov. Rick Snyder.
During the current legislative session, lawmakers had attempted to find a compromise that would raise the percentage back up. The idea received bipartisan support.
“It’s one of those things that really allows us an opportunity to help those that are working but having a hard time to make ends meet. And that’s why I think it’s a good use of taxpayer dollars,” Singh said.
Lawmakers did pass a tax plan that would have restored the earned income tax credit this year. But legislative Republican leadership paired it with an across-the-board income tax cut that Democrats panned.
Gov. Gretchen Whitmer vetoed the legislation.
A tax plan Whitmer supports should have an easier time getting through the Legislature this year when her own Democratic Party takes charge of both the state House and Senate.
But not everyone sees the tax credit as something lawmakers should spend a lot of time on expanding.
James Hohmann is the director of fiscal policy at the Mackinac Center for Public Policy. He said increasing the credit won’t make much of a difference when it comes to goals like reducing poverty.
“It’s not especially targeted at low-income households, although it’s better targeted at low-income households than a number of other programs. And I definitely don’t think that lawmakers should be interested in increasing this because they think it’s going to improve the economy,” Hohmann said.
Hohmann said the state should instead focus on cleaning up its web of social safety net programs to offer better service. He sees the government as spreading itself too thin when it comes to poverty alleviation.
“We can be doing all of this better,” Hohmann said. “When we’re looking at the next time we’re trying to increase the generosity of our assistance programs, we should be instead looking at consolidating our assistance, doing this smarter and more effective, measuring our results and trying to make sure our system works the way it’s supposed to.”
That may take a sizeable amount of will and heavy lifting to accomplish. Hohmann acknowledged the current political will is behind supporting the tax credit expansion.
Singh also pointed to the coalition behind it that came out to support the expansion during the committee process.
“It’s the fact that these business groups who saw that tax cut happen are now advocating to put it back,” he said. “Not only is it just Democrats who are going to continue to push for it but you have this diverse coalition.”
Singh said reassessing to make sure the state is providing an adequate social safety net for those in need is among his plans for next year.
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