MLPP Blog: Factually Speaking

Happy 40th Birthday, EITC!

Added January 30th, 2015 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Today is EITC Awareness Day, and this year marks the 40th anniversary of the widely recognized tool that lifts millions of working families and children out of poverty each year. States have the opportunity to build on the federal credit, which Michigan does. However, in 2011 the state’s Earned Income Tax Credit was cut leaving behind over 15,000 families in poverty in 2012. On May 5, the voters will have the opportunity to restore the credit by supporting an increase in the sales tax by one penny.

The Michigan EITC is only available to families who have earned income from working. The credit ensures that working families are better able to make ends meet. When combined with the federal EITC, working families are lifted out of poverty and children experience better outcomes, such as improved infant and maternal health; better school performance; greater college enrollment; increased work and earnings in the next generation; and Social Security retirement benefits. All of which also benefit Michigan’s economy.

The EITC works to reduce the amount of taxes paid to help struggling families keep more of what they earn. However, when the state EITC was cut by 70% low-income workers experienced a significant tax increase and fewer families were able to move out of poverty. The restoration of the state EITC back to 20% will help these families, who include over 1 million children.

In May, voters will have the ability to do this. By supporting an increase in the state’s sales tax by one penny, people in Michigan will be able to help reduce poverty all while voting to reform and increase funding to fix our roads. As we recognize the 40 years of evidence backing the EITC, let’s spread the word about how we can strengthen it!

–Alicia Guevara Warren

 

Lopsided income growth hurts Michigan

Added January 26th, 2015 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

The top 1% in Michigan earned 25 times the income of the bottom 99%, a new report from Economic Policy Institute concludes.

The report ranks Michigan as the 15th most unequal state in the country and offers new evidence on why Michigan policymakers should refuse more tax cuts so that they can invest in building the skills of a 21st century workforce.

In Michigan, inequality looks like this:

•    $942,993 a year on average for the top 1% of taxpayers.
•    $37,324 average annual income for the rest.

And what does it take to be a top 1% in Michigan? An income of $300,570 lets you in. It’s much harder to get to the very top – 0.01%. For that, you have to have income of nearly $7 million a year or more.

The report for the Economic Analysis and Research Network looks back to 1917 to find that income inequality – measured from the top to the bottom – is as large has it has been since 1928.

Since the Great Recession ended, incomes for the top 1% grew faster than the incomes of the bottom 99% in every state except West Virginia. In Michigan, the top 1% percent captured 82% percent of income growth in the period following the Great Recession.

“This is clear evidence why the economic recovery has not been felt by all  families in Michigan — only those who were already doing well,’’ said Gilda Z. Jacobs, president and CEO of the Michigan League for Public Policy, an EARN affiliate, said in today’s news release on the report. “Our lawmakers should look to this as they create the next budget. They should resist more tax cuts so that Michigan can help struggling families and grow the skilled workforce we need.’’

The lopsided growth is not new. From 1979 to 2012, the top 1% in Michigan saw a 115% jump in income. Meanwhile the bottom 99% realized nearly a 17% decline. Overall, income declined by 5%.

The report comes on the heels of a forum I attended last week hosted by the Institute for Public Policy and Social Research at Michigan State University. At the forum, I was reminded that it could have been far worse in our state.

Charles Ballard, MSU economics professor and vice chair of the League’s board of directors, cited research estimating that without the successful rescue of the auto industry, 1 million more jobs would have been lost in the Great Recession – most of them in Michigan and Ohio.

Michigan has 500,000 fewer jobs today than it did at the peak employment year in 2000, Ballard noted.

As the EPI report concludes, Michigan already has a large and growing income inequality problem. It’s hard to imagine what that would look like if tens of thousands or even hundreds of thousands of good-paying auto manufacturing jobs disappeared in addition to the 850,000 Michigan jobs that evaporated between 2000 and 2010.

– Judy Putnam

Tax policies gone wild

Added January 23rd, 2015 by Pat Sorenson | Email This Entry Email This Entry
Pat Sorenson

Shortsighted tax policy decisions by Michigan lawmakers have created a budget shortfall of $325 million in the current fiscal year, despite growth in the state’s economy.

Because Michigan must balance its budget every year, cuts will be made in the state’s General Fund, the major source of funds for health and human services, higher education and public safety – before the end of September. The 2016 budget, scheduled to be released by the governor on Feb. 11, has an additional revenue shortfall of $532 million.

This was the consensus of state economic and fiscal experts who met with lawmakers last week to determine how much the state has to spend for the remainder of this year and the upcoming year. They all agreed that although the economy is growing, revenues are not following suit.

At first blush, it is difficult to understand how state revenues can be dropping so quickly in a time of economic growth. One of the justifications for the 80% cut in business taxes approved by the Legislature in 2011 was that lower taxes would attract new businesses, create jobs, and ultimately increase state coffers by spurring economic growth.

So what happened? Why the budget gap?

  • Business tax cuts don’t grow the economy. With the 2011 changes, taxes on businesses were cut by $1.6 billion, placing Michigan 49th in the U.S. for business tax contributions to the state. Michigan businesses are now the source of only 2% of total state revenue, despite the fact that employers rely on many essential state services, including police and fire protection, the roads and bridges needed to transport their products, and a good educational system that can create the workforce they need. A major cause of the state’s current budget problem was the deep cut in business taxes in the face of known outstanding business tax credits that are expected to be a drain on the budget for many years to come. Net business refunds could exceed $680 million in 2015, and rise to more than $800 million in 2016.
  • Tepid economic growth. Michigan suffered a 10-year recession from 2000 to 2010, and while the state economy has strengthened in the last several years along with the rest of the nation, we have not yet regained lost ground. The state has recouped less than two-thirds of the jobs lost during the recession, and too many of those jobs are low-wage. And, while Michigan’s unemployment rate has dropped significantly, much of that decline can be attributed to nearly 90,000 discouraged and other workers leaving the labor force.

The state budget director has made it clear that there will be “real cuts.” We should be clear when we talk to our lawmakers that those cuts are the result of tax policies that have benefited Michigan businesses, but have not led to economic recovery for all of the state’s citizens. Government restructuring and efficiencies, while commendable if they can increase opportunities for families who are struggling to make ends meet, are not going to fill the gap.

– Pat Sorenson

Diving deeper into the river of opportunity

Added January 21st, 2015 by Judy Putnam | Email This Entry Email This Entry
Judy Putnam

At the League, economic opportunity is our mission so it was heartening to hear Gov. Rick Snyder talk about the ‘river of opportunity’ in his fifth State of the State address Tuesday. There is an assumption in that analogy, however, that deserves a closer look.

The governor spoke about his background growing up in a 900-square-foot home in Battle Creek in a supportive family. He said despite his family’s modest income, he was still able to be part of the river of opportunity. He spoke of the Michiganians who are not part – separated by poverty, absent parents or other barriers — and he talked about his desire to move them into that river of opportunity.

Though it was a welcome tone from the governor, it contained a flawed analogy. The governor  said government is in the background of the lives of those already enjoying opportunity while it plays a prominent role for those in need. Yet, there is no ‘them and us’ when it comes to government services because we all benefit.

Let’s take public education for starters. Free education is not just for kids from families with low incomes. The support of public universities, including $300 million a year to the governor’s alma mater, the University of Michigan, helps many, many children of the affluent. Tax dollars create the public transportation to move the goods that supports the jobs, helping job providers and workers. In short, public dollars are used to keep that river flowing, and enjoyed by the citizens who are benefiting from opportunity.

The governor also called for revamping of services to help those in need. At the Capitol Tuesday, several reporters sought out League President & CEO Gilda Z. Jacobs for comment on the merger of the Departments of Human Services and Community Health into a new Department of Health and Human Services. Jacobs was positive about the potential to really lift barriers for people and also about the leadership of interim Director Nick Lyon. (See the League’s statement.)

What will be important is making sure that there are savings resulting from true efficiencies and that the merger’s goal isn’t just to save dollars. Simply cutting people from services while poverty and unemployment remain high is not the way to measure success.

With revenues coming in below expectations, the pressure will be on to make those cuts. More insight will be offered in the governor’s executive budget recommendation in February. So stay tuned!

 – Judy Putnam

President urging seven paid sick days a year

Added January 16th, 2015 by Peter Ruark | Email This Entry Email This Entry
Peter Ruark

Imagine a line cook with a head cold having to turn aside and sneeze every few minutes while preparing your lunch. Or a couple of workers fighting the flu while caring for your child at a daycare center. Or your child sitting in school with a lot of sick classmates whose parents could not take the day off to care for them.

This kind of thing probably happens more than we would like to think, because many workers lose pay if they miss work due to sickness.

Thursday, President Obama urged  Congress to pass the Healthy Families Act, a law that would require employers to give their workers at least seven paid sick days each year. He also urged states and municipalities to pass similar laws.

This is good for families and good for public health. As argued in Forbes Magazine, it is also good for business because it helps keep workers productive when they do come to work, by giving them time to recuperate without fear of losing money or even their jobs.

Right now, only three states offer paid sick leave. Michigan is not one of them.

On the contrary, a House committee debated a bill last session going in the opposite direction — to prevent counties, cities and townships from enacting their own paid leave laws. That bill fortunately did not go anywhere, but the fact that a pre-emption bill was introduced shows that paid leave policies are gaining support.

Whether on the federal, state or local level, paid leave policies will help workers and their families and protect the public. Let’s hope that more cities, counties and townships in Michigan will pass paid leave laws as we wait for the Michigan Legislature and Congress to do so!

– Peter Ruark

Gov. Snyder signs Main Street Fairness Act

Added January 15th, 2015 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Today, we applaud Gov. Snyder and the Legislature for strengthening Michigan’s ability to collect sales taxes for online purchases. The League supports the Main Street Fairness Act (Public Acts 553 and 554 of 2014) as it:

Levels the playing field between brick-and-mortar retailers and online retailers by requiring both to collect sales and use taxes and removing an unfair advantage that online retailers currently have;
• Creates a more equitable system for low-income families, who are less likely to make online purchases, by expecting online consumers (usually higher wage earners) to also pay the sales tax on their purchases; and,
• Provides additional revenue, which is especially important since the state is likely to be facing a budget shortfall over the next couple of years.

It is estimated that the bills will bring in a relatively small amount of $60 million, though the state could actually collect more if Congress also acted. Any new revenue, however, is welcome as the state will be faced with making cuts in the current and upcoming budget years. These funds are expected to provide about $44 million a year for schools, $6 million per year for local communities, and $10 million for general state spending.

With a growing number of people shopping online, it just makes sense to collect sales taxes on those purchases as a way to make the tax system fairer for retailers and consumers alike.

– Alicia Guevara Warren

More child care oversight needed

Added January 8th, 2015 by Pat Sorenson | Email This Entry Email This Entry
Pat Sorenson

Every day in Michigan, parents head out to work with their young children in tow, dropping them off at local child care centers or homes. Child care is a necessity for many working families because they rely on two incomes to make ends meet or because they are raising children as single parents.

Yet oversight of health and safety requirements is stretched far too thin in Michigan, a new policy brief from the League concludes.

Child care centers and homes are required to be licensed or registered with the state to ensure that basic requirements are met. Two federal audits and national studies have found that Michigan falls short in its efforts to inspect child care settings. The unacceptable reality is that parents cannot rest assured that their children are spending their days in care that consistently meets state licensing standards.

The risk to children is greatest in families earning low wages, including parents who are required to work 40 hours a week as a condition of receiving public assistance. Low-wage families have fewer options and face difficult choices because they cannot afford higher quality child care that comes at a higher cost.

These are the facts:

  • Michigan cannot provide adequate oversight of child care because the state’s child care inspectors have caseloads that are more than three times the national standard. Child care inspectors in Michigan have average caseloads of 153, with a nationally recommended ratio of 1 worker for every 50 child care programs.
  • In unannounced visits, federal auditors found that child care providers failed to comply with one or more state health and safety requirements. Most disturbing was the fact that half of the family and group child care providers had not done required criminal and protective services background checks, and none of the child care centers had completed those checks on their employees.
  • A national report gave Michigan a “D” grade for its child care centers regulations and oversight, citing ineffective monitoring.
  • Michigan was one of eight states that received a score of 0 out of a possible 150 points for its licensing of child care homes, primarily because of a failure to inspect homes before they are registered and children are placed into care.

The state inspects a range of services in order to protect the public including restaurants, roads and bridges, and grocery stores. Certainly the state’s youngest children, who are in child care so their parents can work to support them, deserve to be at the top of the list.

– Pat Sorenson

The State Priorities Partnership: Celebrating 20 years of impact

Added December 23rd, 2014 by Jean Ross | Email This Entry Email This Entry
Jean Ross
Editor’s note: The League has been proud to be part of this national partnership since 1994. Jean Ross is a program officer with the Ford Foundation. Her blog is reprinted with permission of Ford Foundation’s Equals Change blog.

Over the past two decades, the State Priorities Partnership (SPP) has worked to ensure that states have the resources they need to invest in schools, child care, health care and other services that can help create opportunity, and reduce inequality and poverty. The Partnership—which emerged from conversations between Michael Lipsky, then a senior program officer at the Ford Foundation, and the Washington, DC-based Center on Budget and Policy Priorities (CBPP)—came together in Baltimore last month to celebrate and honor Partnership members past and present, and to strategize at the Center’s 2014 State Fiscal Policy Conference.

Formerly known as the State Fiscal Analysis Initiative, SPP began as collaboration between three national foundations (Ford, the Annie E. Casey Foundation, and the Charles Stewart Mott Foundation), the CBPP, and 12 state-based organizations. Five additional national and regional foundations joined the original three members of the SPP funder collaborative and hundreds of state and local partner funders to invest over $20 million per year in the network. Using evidence and analysis—along with smart communications, outreach, and coalition building strategies—the network racked up a series of impressive victories as it grew in size, scope, and impact. The SPP Network contributed to stopping harmful limits on public investment (so-called TABOR amendments) in more than three dozen states over the past decade; helped persuade reluctant lawmakers to expand Medicaid coverage to 6.3 million low-income Americans under the Affordable Care Act, and secured billions of dollars per year of new resources for critical services in states such as Minnesota and California, while helping to block billions of dollars of damaging state tax cuts.

How has this network remained vibrant over two challenging decades? First of all, the “Partnership” in SPP is more than just than just a slogan: State-based partners, staff at the CBPP, and funders engage in spirited debate and learning that draw on best practices from within and outside the Network. While remaining deeply rooted in analysis and policy advocacy, Partnership organizations’ members now tackle a wider array of issues—including Ford-supported work on immigration and criminal justice reform—that are beyond the network’s original fiscal policy bailiwick. And the Partnership invests in the development of a new, diverse set of leaders through the State Policy Fellowship Program that places recent graduates in state-based organizations. All of this gave those of us gathered in Baltimore many reasons to celebrate.

– Jean Ross

High poverty, unemployment harm economic growth

Added December 22nd, 2014 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Often touted as the “Comeback State,” Michigan’s economic recovery has not included everyone as reflected in the state’s high poverty and unemployment rates. Leaving people behind will only hinder Michigan’s potential economic growth, which has already showed signs of slowing.

A recent report ranking states based on multiple indicators of economic security and opportunity reveals the state’s major lack of investment in its people. On almost every factor from poverty to education to affordable housing, Michigan is ranked worst or second-worst among the Midwest states. (more…)

Celebrating good public policy in Michigan

Added December 19th, 2014 by Gilda Z. Jacobs | Email This Entry Email This Entry
Gilda Z. Jacobs

Restoring the Earned Income Tax Credit, part of the bipartisan compromise on road funding approved early today, will be a boost to struggling families across Michigan.

If voters agree to the package, it will put extra dollars into working households where families have the hardest time making ends meet. It’s designed to offset additional costs from an increase in the state sales tax and wholesale gas tax to pay to fix Michigan’s battered roads. (more…)

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