Michigan Earned Income Tax Credit

Feb 16, 2000 at 12:00 am

"The poor are my constituents. As their representative, I will not turn my back on them. I urge you – I urge you with every argument I can muster – not to turn your back on the poor."

Gov. John Engler, 2000 State
of the State Address

If Gov. Engler is so concerned about low-income families with children, why has he consistently opposed the most effective tax policy proven to help working poor families become economically self-sufficient?

The Earned Income Tax Credit (EITC) is a policy that encourages work by relieving the tax burden on families that hover around the federal poverty line. If John Engler is sincere about helping working families he should support a state Earned Income Tax Credit.

Besides helping low-income working people, since the EITC is only available for people that work, it complements President Clinton’s 1996 welfare reform, by furthering the success of former welfare recipients in becoming self-sufficient as they enter the work force. With a minimum wage at $5.15, a full-time job is not sufficient to lift a family out of poverty. A state EITC will help families work themselves out of poverty.

A recent study by the Economic Policy Institute indicated that some 14.9 million people across the country – including 8.7 million children – live in a working poor family. According to the Census Bureau the poverty line for a family of three in 1998 was an income of $13,120 and $16,530 for a family of four.

Gov. Engler proposed in his State of the State address that the first $12,800 of income for a family of four with two children be tax-free. Although this is a step in the right direction from current Michigan law, this means that Engler still wants to tax a working family whose income is below the federal poverty line. Engler wants to tax the difference between $12,800 and the federal poverty line of $16,530 for a family of four with two children, or $3,730, which makes it much harder for working families to make ends meet and provide for their kids.

The EITC has become the primary federal effort to boost income from work and lessen poverty among families with children. This is often called the "make work pay" strategy. Because the EITC rewards work, both Republicans and Democrats have supported it. President Reagan called the EITC "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

Despite the success of the federal EITC in reducing poverty among working families, it is not enough. A state Earned Income Tax Credit can further the goal of bringing working families closer to or above the poverty line, by relieving the burden of payroll taxes and the sales tax on working poor families.

A state EITC would benefit the 573,904 working families that have taken advantage of the federal EITC and it would also help the thousands of new workers entering the private sector, including former welfare recipients.

In 1997, as a state representative, I introduced a bill proposing that Michigan enact a state Earned Income Tax Credit that would be available to families that are eligible under the federal EITC. My proposal would have provided a state tax credit of 10 percent of the federal EITC and provide approximately $77 million in tax relief. With John Engler willing to spend $228 million to help the working poor, my proposal would have accomplished the task with considerably fewer tax dollars. Representative Dave Woodward, D-Madison Heights, is the current sponsor of a state EITC with House Bill 4330.

With the nation, including Michigan, enjoying record-setting prosperity, the debate has increasingly been about what can be done for working people who have not benefited all that much from this economy. Gov. Engler’s tax proposals in his State of the State address fall short of helping working low-income families with children. He says "he will not turn his back on the poor." But by not offering a hand up to struggling low-income families, through a state Earned Income Tax Credit, he clearly is turning his back.