Earned Income Tax Credit Concerns

By: Meaghan M. Norman Email
By: Meaghan M. Norman Email

"I represent the working poor," a statement of pride from Lansing resident Ramona Spencer. She lives below the poverty line. Last year she made just over $13,000 and qualified for $609.00 because of the state Earned Income Tax Credit

"With that money I pay for my utilities, and I say, keep warm water running in my tub," said Spencer.

Gilda Jacobs, CEO of the Michigan League for Human Services says the EITC has been mischaracterized and its benefit overlooked.

"Instead of looking at the EITC as a percentage of the deficit, it really should be looked at -- big picture -- with all the other tax expenditures and loopholes and credits and deductions --- which are $34 billion."

But what about the $1.8 billion deficit? How does the state close such a wide gap when many think the state is just giving money away?

"We're talking [a savings of] more than 300 million per year, said Charles Ballard, economist and professor at Michigan State University. "If you were to eliminate the EITC, that would be one-sixth or one-fifth of the budget deficit so that's a portion --- certainly doesn't solve the problem by itself."

Ballard is a proponent of keeping the EITC intact, saying eliminating it would be a huge step backward.

"Until the EITC was instituted, Michigan was one of the most regressive tax systems in the country. The EITC took us off the list," said Ballard. "If we were to eliminate [it] we'd go back to being one of the 10 most regressive [states] and to me that's not a move in the right direction."

And many other economists say that the EITC isn't simply a handout, but an earned incentive to work.

"I feel like I"m already at the low end of the income here. I'm barely on the ladder," said Spencer. "I'm proud to say it's not a handout. I'm working. I'm earning it. I'm grateful it's there. I hope it doesn't get cut."

Governor Synder will be releasing his budget proposal Thursday morning. The EITC is one tax credit that is on the potential chopping block.

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