EITC defenders react strongly to possible cut

LANSING — A proposal to eliminate the state’s Earned Income Tax Credit floated last month by Michigan House Speaker James ‘Jase’ Bolger has defenders of the credit lining up political forces while opponents appear to be softening their position.

“I think there is a perception problem right now regarding the Earned Income Tax Credit,” Bolger spokesman Ari Adler said in an interview with Michigan Messenger. “When you talk about all the other tax credits — we are going to be reviewing them. We just don’t have as much to say about it (other tax credits) because they have not been reviewed yet. In hindsight it might have been a mistake to use that (EITC) as an example of potential cuts.”

Adler says the use of the EITC for comparison sake allowed supporters of the credit to paint the issue as cutting tax breaks for working families while protecting business credits. He says that is not accurate at all, but an understandable misperception.

Bolger, Adler’s boss, and the GOP majority in the state House, made headlines in mid-January when they announced that the drive to balance the state’s budget and close a projected $1.8 billion deficit would require “painful cuts” — with the EITC as an example.

The EITC is a credit passed under the administration of Democratic Gov. Jennifer Granholm. The credit enjoyed bipartisan support at the time. But lawmakers now say the credit might be too expensive to keep in place.

The credit will cost Michigan $354 million in the coming fiscal year, reports Peter Luke on MLive.com. The state EITC is available to any Michigan resident who qualifies for the federal EITC and is equal to 20 percent of the amount of the federal credit.

But advocates in favor of keeping the credit say it is vitally important to working families and in many cases is the difference between living under the poverty line or just above it.

“The Michigan Earned Income Tax Credit is a successful anti-poverty tool that helps low- and moderate-income families and small businesses in Michigan. Eliminating this credit amounts to a tax increase on our most vulnerable families and will tax working people into poverty,” says Gilda Jacobs, CEO and president of the Michigan League for Human Services. Jacobs is also a former Democratic state senator from Southeast Michigan.

“Gov. Snyder wants to move children in our state out of poverty. We agree. It’s clear that ending the state credit would move us in the wrong direction, putting more children, not fewer, into poverty,” Jacobs says.

To support the point MLHS released a report, “Keeping Kids Out of Poverty with the Michigan Earned Income Tax Credit,” tying the issues of childhood poverty with the economy. By lifting children out of poverty, the group says, the EITC decreases the potential that those kids will grow up to have less economically productive lives.

Gov. Snyder has been mostly mum on the EITC, but may have given residents a peek at what will guide his Feb. 17 budget and tax proposals. In comments to reporters on Monday, Snyder said that taxes needed to be evaluated by three basic principles: Simplicity, fairness and efficiency.

Asked if the EITC cuts were a done deal, as seems to be the public perception, Adler responded, “That’s not true. We just simply don’t know what the answers are. We have to review the entire budget and figure out what we can afford. For too long we have been saying here is what we spend, how do we get to the revenue. We need to say here is what our revenue is, now what do we need to keep. Whatever it is, if we can’t afford it, we are going to have to make some cuts.”

That statement was met with cautious optimism by Jacobs.

“We are hopeful that the Speaker is thinking about a more deliberative approach to reviewing other options on the $34 billion list of tax credits and deductions,” says Jacobs. “That would be a very good and fair way of handling this.”