Low-income workers could get $25-per-child credit

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Business Week
By: Kathy Barks Hoffman
April 20, 2011

A proposal to make up some of the money low-income workers would lose if Michigan's Earned Income Tax Credit is eliminated isn't getting many cheers from groups who say the credit should be saved.

House Tax Policy Chairman Jud Gilbert, R-Algonac, said Wednesday he'd like to give low-income families a $25-per-child tax credit because children are among the most vulnerable of the poor.

"It's important for those folks that have children to have a little extra money," Gilbert said. "We wanted to target it to that."

The per-child credit would spread $25 million among low-income families. Most also would share in an extra $79 million that could be set aside to give them a larger income tax credit for the property taxes or rent they pay.

The $104-million package is far less than the $360 million that around 800,000 low-income working families are getting now through the state Earned Income Tax Credit, which took effect in 2008. Snyder has said the state no longer can afford the state EITC given its budget shortfall and that he's doing what he can to protect health care coverage and tax breaks for those making less than $30,000.

But a coalition that supports keeping the EITC says the governor is simply eliminating it so he can give a $1.7 billion tax break to businesses in Michigan. They note that Snyder also wants to eliminate a $600-per-child deduction that helps all taxpayers with children, including the working poor, and warn that eliminating the state EITC will push 14,000 more Michigan children into poverty.

Instead of getting an Earned Income Tax Credit of around $511, a family with one parent and two children making $25,500 would get only a credit of only $54 under Gilbert's plan, according to Michigan League for Human Services President and CEO Gilda Jacobs. Families making less also would lose hundreds of dollars, a change the Michigan Catholic Conference has opposed.

"A credit of $25 per child does not go very far in making up for these other losses," Jacobs said in a release. "Children in working families will still fall into poverty as a result of these changes, and working poor families will be asked to pay a bigger share of their income than higher-income families in order for businesses to enjoy an 86 percent tax cut."

Gilbert, however, said he was comfortable the extra $104 million was the right step.

"At the end of the day, I think that's a pretty fair deal as far as helping low-income folks," he said. "The 20 percent EITC was probably something . . . that wasn't sustainable."

Snyder is pushing lawmakers to finish the budget by May 31. No vote has been held yet in the full House or Senate on eliminating the state EITC.

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