Michigan faces unprecedented economic conditions. As we continue to recover from the pandemic and deal with increasing inflation and high gas prices, we are also faced with a shortage of workers that creates great uncertainty for employers across the state.
Both of our organizations understand the importance of work. The dignity that comes from earning an income to provide for your family is powerful. That’s why we are both advocates for public policy that rewards and encourages people to have a job.
One policy that encourages work that has brought us both together – and members of both political parties, as well as more than 90 public policy, religious, and business organizations – is expanding Michigan’s Earned Income Tax Credit (EITC).
The EITC is a refundable tax credit that is designed to help lower-income taxpayers and working families who make less than $57,000 a year. The credit gradually phases in with lower incomes and phases out as incomes rise. The EITC incentivizes work, as the tax credit can only be claimed if the recipient has earned an income.
The federal EITC began in 1975 when Michigan’s own President Gerald R. Ford worked across the aisle to establish the tax credit. Nearly every president since, from both parties, has expanded the EITC. In 2006, a bipartisan group of Michigan lawmakers came together to enact our own EITC to provide a match of the federal EITC.
How to spend the surplus productively
Currently, Michigan is faced with a historic budget surplus. And as economic uncertainty grows for Michigan’s working families, expanding our EITC would help solve several problems facing all Michigan taxpayers and businesses.
The EITC encourages work by providing a tax credit for hard-working Michigan families and results in money being spent locally, as families use the tax credit for necessities, like auto-repairs, food, childcare, and school supplies. Estimates show that by expanding Michigan’s EITC to 30 percent, a single parent household with two children would see their tax credit grow from $355 to $1776 and would boost local Michigan businesses by more than $440 million annually.
Surveys show that two-thirds of families live paycheck to paycheck. In 2019, nearly 730,000 Michigan households, including more than four-in-ten Michigan children, benefited from the EITC. Data shows that EITC recipients only claim the credit for one to two years, as the EITC helps lift them out of poverty.
Employers also gain
Employers and small businesses benefit from this incentive to work, too. At a time when hotels, restaurants, and employers of all sizes are having trouble finding enough employees, rewarding work will help increase Michigan’s labor force. Expanding the EITC provides a growth opportunity for small businesses and boosts local economies.
As Michigan’s leaders determine what to do with the historic budget surplus, we encourage them to expand Michigan’s EITC. The benefits are clear for working families and Michigan’s businesses. We have an opportunity to deal with the worker shortage and help those who need it most deal with the ever-rising costs of daily life. We encourage Michigan’s leaders to seize the opportunity before them to help boost our economy and help lift thousands of hard working families out of poverty by expanding Michigan’s EITC.
Brian Calley is the President and CEO of the Small Business Association of Michigan. Paul Long is President and CEO of the Michigan Catholic Conference.
This article originally appeared on Detroit Free Press: Opinion: Expand Michigan Earned Income Tax Credit with budget surplus