The Michigan Earned Income Tax Credit is one of the most effective tools for supporting working families and reducing poverty. Michigan lawmakers approved restoration of the state EITC to 20%, if voters had approved the penny sales tax increase on May 5 to pay for needed road repairs and to support schools. However, the proposal was defeated, and the state EITC is now targeted for elimination to help pay for road improvements.
The Michigan EITC was cut by 70% as a result of major tax changes that took place in 2011. The Michigan Legislature and Gov. Snyder reduced Michigan’s EITC from 20% of the federal EITC to 6%. Most EITC recipients claim the credit only temporarily when a job disruption or other significant event reduces their income. A recent study found that, of people who received the EITC over an 18-year period, 61% received the credit for only one or two years at a time. The EITC has also been shown to have a long-lasting, positive effect on children, helping them do better and go farther in school. The EITC also increases work effort and expands Michigan’s economy.
The EITC provides working families with additional options for housing, child care, and transportation so that the family can remain in the labor force and take steps toward self-sufficiency. Restoring the EITC to 20% will lift an estimated 15,000 families above poverty and lessen the impact of poverty on 800,000 families, including more than 1 million children.