In News Releases, Tax and Budget

For Immediate Release
Jan. 29, 2021

Contact:
Alex Rossman
arossman@mlpp.org
517-775-9053

Michigan League for Public Policy also shares county EITC fact sheets, recommendations to expand and improve state credit

LANSING—The Michigan League for Public Policy joined organizations across the state and country today in celebrating the 15th annual EITC Awareness Day, highlighting the new federal lookback provision for the Earned Income Tax Credit (EITC) to help taxpayers impacted by COVID-19. The Earned Income Tax Credit is a federal credit available to families with low and moderate incomes.

“The EITC helps workers pay for things like transportation costs or child care and other daily necessities, and because the credit is refundable, money is put right back into local economies,” said Gilda Z. Jacobs, President and CEO of the Michigan League for Public Policy. “The EITC is a proven anti-poverty tool that rewards work and helps workers in every area of the state and in a variety of industries take steps toward self-sufficiency. And research shows that the EITC not only helps workers, but their kids as well, both immediately and for the rest of their lives.”

In December 2020, the federal government passed a comprehensive COVID-19 relief bill that included what is known as the EITC lookback provision. This provision allows tax filers who were eligible to claim the federal EITC for 2019 to make a choice of whether to use their 2019 wage and self-employment income or their 2020 wage and self-employment income to calculate their EITC and/or Child Tax Credit. If a taxpayer’s income declined in 2020 in such a way that the amount of EITC they could claim is reduced, then that taxpayer will be able to claim the higher credit from 2019. This is intended to limit COVID-19’s impact on a filer’s EITC, regardless of the pandemic’s impact on their income.

In practice, the filer or preparer will enter both 2019 and 2020 earned income into their worksheet or chosen tax software. If the resulting 2019 earned income is greater than the 2020 earned income, then the filer or preparer may choose to use that prior year earned income amount to calculate the EITC.

Michigan supplements the federal credit with its own state credit, but it’s one of the weakest state EITCs nationwide. It once was 20% of the federal credit, but is now just 6%. In tax year 2018, more than 729,600 families statewide received an average state credit of $150, putting $110 million back into the local economy. Using the most recent tax data available (2018), the Michigan League for Public Policy has developed county fact sheets on the state EITC and its local impact.

To maximize the Michigan EITC’s benefit, the League continues to advocate for the following improvements: restore the state EITC to 20% of the federal credit, a change that would have meant an average of $350 more per taxpayer and an extra $266 million back to the state economy in 2018; expand the credit to students, caregivers, all immigrant workers and workers not raising children in their homes; and improve outreach to inform residents of their eligibility for the credit (nearly 1 in 5 eligible Michigan workers do not claim the EITC).

For those taxpayers that make less than $57,000 a year, Michiganders can take advantage of the Internal Revenue Service’s Volunteer Income Tax Assistance (VITA) program to get free help preparing their taxes.

BACKGROUND:
EITC Awareness Day began in 2006 and is a national effort organized by the IRS and its partners to promote the EITC and ensure every qualified worker claims and receives their tax credit.

The federal Earned Income Tax Credit was signed into law in 1975 by Michigan’s own President Gerald R. Ford. Created by a Republican president and a Democratic majority in Congress, the EITC has continued to have strong bipartisan support ever since. The six U.S. presidents who succeeded President Ford all signed a federal EITC expansion into law.

In addition to the federal EITC, a state EITC based on the federal credit was established in 2006 under similarly bipartisan circumstances. The Michigan EITC was created under Republican majorities in the Michigan House and Senate, spearheaded by former West Michigan Senator and Senate Majority Leader Ken Sikkema, and signed into law by Gov. Jennifer Granholm.

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The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on economic opportunity for all. It is the only state-level organization that addresses poverty in a comprehensive way.  

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