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Wednesday, April 16, 2014
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Published: 3/13/2011 - Updated: 3 years ago

Think twice about EITC

PART of the reason Michigan's finances have gotten into the mess they're in is a long-standing state government practice of offering special 'tax-credit" deals for a patchwork quilt of things, some worthwhile, some not. This absurdity reached new heights a year ago, when then-Gov. Jennifer Granholm even appeared on stage to announce a special tax credit for a convicted embezzler who was briefly awarded $9.1 million for a business that existed only in his head.

New Gov. Rick Snyder thinks it is time to get back to a level playing field, so he has proposed abolishing special tax credits. He is mostly right, but one exception needs to be made.

Michigan's Earned Income Tax Credit, usually known as EITC, benefits the working poor. The governor's proposed budget would zero it out.

True, the tax credit costs the state $350 million a year. But it is not, as often depicted, a welfare program. It is a program that keeps people out of dependency, gets money circulating through the economy, and makes the state's tax structure a little more fair.

Michigan has a mostly regressive, flat-rate income tax that actually has lower-income families paying a higher proportion of their earning in state and local taxes. The EITC helps redress the balance by returning money -- an average of $432 a year -- to people who are likely to immediately spend it in the local economy.

There also are sound social reasons for continuing the tax credit. If it is eliminated, Gilda Jacobs, head of the nonprofit Michigan League for Human Services, estimates it will plunge 14,000 children into official poverty. Perhaps most fearful of the EITC's demise are officials at the Detroit Rescue Mission Ministries, who fear a new onslaught on their already taxed resources.

Michigan does need to eliminate spending, and there are many places to do it. Going after a program that enables the working poor to be productive members of the community shouldn't be one of them.



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