In Blog: Factually Speaking

Tax season officially opened on Monday, January 23rd, and Michigan residents should be aware that there are a number of ways the federal and state tax code helps keep more dollars in your pockets and in your local economies. One of the best ways our tax system does this is the Earned Income Tax Credit (EITC), which is one of the most effective anti-poverty tools we have. This credit rewards working Michigan residents and helps them take steps toward self-sufficiency, and it has long-lasting, positive effects on children.

And EITC Awareness Day today helps ensure that workers with low and moderate incomes who qualify actually know about and receive it.
In 2015, about 788,000 Michigan taxpayers claimed the EITC, receiving $2,488 on average. This helped put about $2 billion back into local economies, as recipients used their credits to pay for things that helped them keep working, such as child care and transportation, as well as groceries, utility bills and paying down debt.

Michigan also provides an added boost to these residents through a state EITC equal to 6% of the federal credit. In 2014, about 775,500 households raising over 1 million children benefitted from the Michigan EITC. The average income of a Michigan EITC recipient was $17,866. The state credit averaged $143 and put $111 million back into Michigan’s economy. The Michigan credit itself helped pull nearly 6,800 households above the poverty line.

As awesome as this credit is, it can do more.

The federal credit should be expanded to workers not raising children in their homes. The credit currently provides little to no help to these hardworking taxpayers, and they are the lone group of taxpayers taxed into—or deeper into—poverty by our tax system. Expanding the credit would help up to 27,000 Michigan veterans and military members and up to 98,000 rural households. It would benefit workers doing a wide range of jobs, help workers with grown children, as well as up to 160,000 young workers just starting out.

To maximize its benefit, the Michigan EITC should be restored to 20% of the federal credit, where it was before being cut to 6% in 2011. In 2011, the credit put $446 on average back into workers’ pockets and into Michigan’s economy. At this higher rate, the state EITC pulled 22,000 households above the poverty line. In 2014, if the credit had equaled 20%, households would have received an average of $477 and would have put more than $370 million back into our local economies.

Finally, currently about 1 in 5 Michigan residents who are eligible for the credit do not claim it. A married couple filing jointly with three kids can make up to $53,505 and still qualify for a credit. A single parent raising one child can earn up to $39,296 and receive a credit. Families with children receive a greater credit than those without.

To see if you’re eligible, and to get some free tax preparation help, go to: Due to federal law changes in place this year, tax returns with the EITC or the refundable portion of the Child Tax Credit will not receive their refund until mid- to late-February. Do not pay for a rapid-refund product that will cost you more in the long run than if you wait for your tax return to be processed and refund to be paid. And please help spread the word about all the good the EITC does in Michigan and what we can do to expand it.

— Rachel Richards

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