While much attention has been focused recently on protecting the Michigan Earned Income Tax Credit (EITC), there is equally urgent action needed in Washington to save critical pieces of the federal EITC and Child Tax Credit (CTC). The federal and Michigan EITCs combine to provide much-needed support to help working families rise out of poverty, and we have to fight this battle on multiple fronts in order to protect these valuable tools.
Since Michigan's EITC is calculated as a percentage of the federal EITC, anything that is done at the federal level to possibly reduce or eliminate the federal credit — or anything that is not done to extend and protect it — will directly impact our state credit. Inaction in Washington on the federal EITC puts Michigan workers in double-jeopardy, as their state credit will be threatened as well.
The three provisions of the federal EITC and CTC that are set to expire are: a larger EITC for families raising three or more children; a reduction in the EITC “marriage penalty” that some two-earner families face; and a lower CTC earnings exclusion that expands the credit to very low-income working families. These stipulations are critical to helping millions of Americans and hundreds of thousands of Michigan residents make ends meet and afford the very things that keep them working, such as child care and transportation.
If Congress does not preserve these provisions, more than 50 million Americans, including 25 million children, will lose part or all of their EITC or CTC. Right here in Michigan, 727,000 children in 415,000 Michigan families will lose some or all of their working-family tax credits and 176,000 children, and 357,000 Michiganders overall, will be pushed into — or deeper into — poverty.
Although these credits are facing uncertainty, some legislators in Washington have made clear their plans to make many expiring business tax breaks permanent. Rather than pitting our businesses and our workers against each other, the League and our allies are simply asking that these credits be treated equally and made permanent together.
If Congress is willing to make any corporate tax breaks permanent, they should in good conscience be willing to do the same to ensure that vulnerable working families are not left behind. The formula for economic success should include businesses and workers alike, and both state and federal elected officials should be working to reduce poverty and the need for government assistance, not the other way around.
The EITC and CTC are two of the nation’s most effective pro-work, anti-poverty policies—and research shows their impacts on the well-being of poor children and their families are long-lasting. By enabling one generation to work their way out of poverty, these credits help break the poverty cycle and give kids a better chance at success when they grow up.
These credits help families and also our state economy as a whole. According to the most recent data available, the EITC boosted the incomes of 846,000 Michigan households, putting about $1.9 billion into Michigan’s economy. The CTC also had a wide reach in Michigan, with 551,000 Michigan households receiving the credit.
We have to stop looking at these credits solely as line items in a budget, but rather as faces in our communities. These are the workers, parents, and veterans that live in our neighborhoods and work in our restaurants, shops, senior centers, daycares and schools.
About 62,000 Michigan veteran and military families receive the EITC or CTC, and about 602,000 Michigan mothers and 362,000 fathers in working families receive one or both of the credits.
According to a recent report, the EITC and CTC do not discriminate against industries or occupations; these credits help working residents in a wide range of jobs. The following Michigan workers could lose all or part of their credits if we let these provisions expire:
70,800 cashiers and retail clerks;
68,800 in the manufacturing industry, such as machine operators and welders;
68,400 administrative assistants and other office support staff;
And 56,500 food service workers—such as waitresses, dishwashers and cooks.
As Congress considers making the recent EITC and CTC improvements permanent, it also has an opportunity to fix a glaring gap in the EITC that excludes workers who are not raising dependent children, including young people just starting out and noncustodial parents. This oversight in the federal income tax system virtually taxes millions of working poor adults into poverty, and making a more adequate EITC available to these workers would help correct this problem. House Ways and Means Committee Chairman Paul Ryan (R-WI) and President Barack Obama have proposed nearly identical proposals to expand the EITC for these childless workers, and Congress should seize this opportunity to act in a bipartisan way.
The state and federal EITC and CTC only go to people who work and are specifically designed to encourage employment and self-sufficiency. The EITC and CTC have a history of bipartisan support — from President Ronald Reagan to President Bill Clinton. It is now up to Washington to continue that bipartisan support by working together to save these important provisions and strengthen the EITC for childless workers.