The American Rescue Plan Act, signed by President Joe Biden on March 11, provided the nation with a once-in-a-generation opportunity to make historic and bold investments in our people.
These investments include temporary expansions of the federal Earned Income Tax Credit (EITC) — by expanding it for workers without qualifying children —and the Child Tax Credit (CTC) — by increasing the credit amount for children and making the credit fully refundable for families with the lowest incomes. Congress should now build on that opportunity by making these tax credit expansions permanent, as Biden has called for in his American Families Plan.
The EITC is a refundable federal tax credit available to people who work but have low incomes; Michigan supplements this credit with its own state credit equal to 6% of the federal credit amount that benefits Michigan families in every county.
Unfortunately, prior to the American Rescue Plan Act’s temporary improvements, the credit was too low for workers without dependents and many didn’t even qualify for it, and these workers remained the lone group that are taxed into (or deeper into) poverty by our federal tax code. The American Rescue Plan Act provides an enormous boost to workers without children by:
- Raising the maximum credit from about $540 to roughly $1,500
- Raising the income cap for these adults from about $16,000 to about $21,000
- Expanding the age range of eligible workers without children to include younger adults aged 19 to 24 (excluding those under 24 attending school at least part time) as well as to people aged 65 or older.
The CTC helps families with low incomes offset part of the cost of raising a child. The American Rescue Plan Act makes three significant temporary changes to the CTC:
- It makes the credit fully available to children with parents who only qualify for a partial credit or no credit because their earnings are too low
- It increases the maximum credit to $3,000 per child and $3,600 for children under age 6
- It allows the credit to cover 17-year-olds
These credits are already one of the most successful anti-poverty tools we have. Together, in 2018, they lifted 5.5 million children nationwide above the poverty line, more than any other program. The changes made in the American Rescue Plan Act are estimated to lift another 4.1 million children above the poverty line, cutting the number of children in poverty by more than 40%.
Based on recent estimates by the Center on Budget and Policy Priorities, the CTC changes in the American Rescue Plan Act will benefit over 1.9 million — or about 90% of — Michigan children, including 329,000 Black children and 168,000 Latinx children. This includes 810,000 Michigan children who had been previously left out of the full $2,000 CTC prior to the American Rescue Plan Act. Permanently extending these provisions would help lift 114,000 Michigan children out of poverty, and would reduce child poverty by 44% statewide.
Additionally, the expansions and increases of the EITC to workers not raising children will benefit 571,000 Michiganders, including 117,000 workers without children in rural areas.
This amounts to about 23% of rural workers without children, and 18% of workers without children living in metropolitan areas, benefiting from the expansions. Many of these workers are those we relied heavily on during the pandemic these last 16 months, including cashiers, child care workers (who are among the lowest-paid workers in Michigan), medical assistants, food preparation workers, delivery drivers and custodial staff.
The COVID-19 public health crisis has had, and continues to have, a significant impact on our state and economy, especially on women workers and workers of color. The temporary tax credit expansions in the American Rescue Plan Act provide a critical boost to the incomes of workers, families and children. These credits are often used to pay for things that allow Michigan residents to work, like transportation and child care, and the effects are felt throughout the state’s economy.
But in order to ensure that all Michiganders have access to a just and equitable economic recovery, Congress should work to make these expansions permanent. We are grateful for the strong support of U.S. Sens. Debbie Stabenow (D-Lansing) and Gary Peters (D-Bloomfield Twp.) in this effort, and we hope all members of Congress will follow suit as they work on the American Families Plan legislation.
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