Opinion :: Expand Michigan’s Earned Income Tax Credit


Rarely does a tax policy in Michigan enjoy broad bipartisan support. Lansing is now debating this rare example, an expansion of a tax credit for working families.

What if I told you that a single change in Michigan tax law could:

  • Providing simple and effective tax relief to working families in Michigan. In fact, it has long been recognized as one of the government’s most important anti-poverty programs.
  • Directly support Michigan’s small business community.
  • Provide a significant boost to the state’s long-term economic growth.

The Earned Income Tax Credit is a refundable federal tax credit, available only to working taxpayers with special supports for those with children, created more than 40 years ago with the support of Democrats and Republicans.

Michigan, like 30 other states, offers a state tax credit directly tied to federal credit requirements. First established in 2006, Michigan’s EITC has ranged from 20% federal credit to 6% today.

Senate Bill 417, sponsored by State Senator Wayne Schmidt, would gradually increase Michigan’s EITC to 30%. And it’s the tax cut proposal that finds strong support from business groups – including nearly a dozen local chambers of commerce, from Midland to Detroit, as well as the Michigan Manufacturers Association, the Small Business Association of Michigan, the Health Care Association of Michigan, Michigan Restaurant and Lodging Association, religious organizations, and local service groups like United Ways statewide.

Michigan’s EITC offers a tax cut, not a new state program, to working families in Michigan. Very little bureaucracy is needed, which means more of the money goes to supporting families.

There are three main reasons why I fully support SB 417:

  • The EITC has a proven track record of integrating people into the labor market. Especially these days, when Michigan employers struggle to find workers, the EITC increases the after-tax financial benefit of working. Unlike other government programs, families must work and file a federal income tax form to be eligible. This back-to-work incentive benefits all employers, especially small businesses in the state.
  • An increase in the EITC directly supports struggling Michigan families. It provides direct support to those who need it and more relief to those who need it most. It’s no secret that for decades the state and national economy has generated record numbers of jobs, but lacks well-paying jobs, such as jobs that can support a family in the middle class. By some measures, nearly 40% of families in Michigan do not earn enough to support a family with basic necessities. Moreover, while it will take years for the full economic impact of the pandemic to be felt, the past two years have only increased the lack of well-paying jobs and growing inequality. Many families use the EITC for only a few years, as a helping hand, not as a handout.
  • Increasing the EITC can serve as a catalyst for overall economic growth. Long-term economic growth is determined by the number of workers and productivity. Decades of research have shown that the EITC is effective in getting people back into the workforce. This way, all Michiganders benefit from an increase in the EITC.

The EITC is a win for Michigan families, employers, and the state’s economy as a whole. A broad coalition of more than 80 business groups, nonprofits, and foundations has come together to support an increase in the EITC, for the reasons outlined above. Now is the time for the Legislature and Governor Gretchen Whitmer to augment Michigan’s EITC and enact SB 417.

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