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The Republican-led Legislature has the chance to pass a bill with bipartisan support during the lame duck session that would expand the state’s Earned Income Tax Credit (EITC) that helps working-class families. And advocates for the expansion are saying now is the time.
During a roundtable Wednesday, former state Sen. Peter MacGregor (R-Rockford) said that when he served in 2011 the Legislature cut the state’s EITC tax from 20% to 6% “to balance the budget.”
“At that time or soon after that time, my colleagues and I made a deal that if we ever have the revenues to reverse this or increase it, we’re going to do it,” MacGregor said.
That plan was proposed by GOP former Gov. Rick Snyder along with a $2 billion business tax cut.
Senate Bill 417, introduced by state Sen. Wayne Schmidt (R-Traverse City) in May 2021, would let taxpayers take a credit out of their individual income tax at a rate equivalent to the federal EITC in the same year. The bill, if passed, would gradually increase the EITC to 7% in the 2021 tax year; 8% in the 2022 tax year; 9% in the 2023 tax year; 10% in the 2024 tax year.
Per the Internal Revenue Service (IRS), individuals qualify for the EITC based on income levels in which their adjusted gross income must be less than:
- $51,464 ($57,414 for married filing jointly) if you have three or more qualifying children.
- $47,915 ($53,865 for married filing jointly) if you have two qualifying children.
- $42,158 ($48,108 for married filing jointly) if you have one qualifying child.
- $21,430 ($27,380 for married filing jointly) if you don’t have a qualifying child.
A qualified child is defined as a child who is under age 19 at the end of 2021 and younger than you; under age 24 at the end of 2021, a student and younger than you; or permanently and totally disabled at any time during 2021, regardless of age.
The bill was referred to the Senate Finance Committee and received a hearing in December, but didn’t move out of committee for a vote.
MacGregor said since the EITC was cut under Snyder, “we’ve had good budgets, better budgets and poor budgets in the last 10 years, but these last two budgets with the increased revenue [from federal COVID-19 relief funding]. … I mean, we have the revenue to do this.”
Lou Glazer, president of the Michigan Future Inc., a nonpartisan organization focused on promoting Michigan’s economic success, said this tax credit expansion could benefit over 730,000 Michigan households and more than 40% of Michigan children.
Glazer said if the legislature passes this legislation during lame duck, taxpayers will get the additional $600 when they file their 2022 taxes.
“If you wait to do it until 2023, people will not get the credit until they file taxes in 2024,” Glazer said. “There’s a difference between having a credit to help pay the bills in a time of high inflation now as opposed to a year from now.”
There are only a few session days left this year and GOP leaders haven’t expressed interest in pursuing a lengthy agenda.
Democrats have proposed legislation for years increasing the EITC, but for years it failed to gain traction in the GOP-controlled Legislature. Now, as the bill has garnered bipartisan support, he is concerned it will be lost in the politics of a lame duck session.
MacGregor said the “conservative” policy has been historically “misunderstood” by Republicans and Democrats may opt to hold off on the expansion until 2023 to “get the win” and pass a Democratic-sponsored bill.
“I talked to my friends in the Senate and everybody thinks this is a great deal, but the problem is that someone wants something in return,” MacGregor said. “There’s not a trade-off when it comes to tax reform. There’s no losers here. … We need to take the politics out of it.”
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