Note: This op-ed originally ran in the Detroit News.
Workers and their families need relief right now, and state leaders can provide it by restoring the Earned Income Tax Credit (EITC).
This is about more than pandemic relief. The economic impact COVID-19 has had on workers and their families has been felt across the country. But while the financial challenges so many are grappling with have been exacerbated by this crisis, we know it is not the root cause. Before the first case of COVID-19 even hit Michigan, 43% of households in our state were not earning enough to cover the basic cost of food, housing, healthcare, childcare, technology, transportation, and taxes. This is a failure not of individuals, but of our systems not setting people up to succeed. This is well documented in the ALICE report, a study produced by the Michigan Association of United Ways which compares actual household earnings to the basic, no-frills monthly cost of living.
Contrary to popular belief, the overwhelming majority of those struggling to get by are working. They are individuals and families, young and old, who are playing by the rules and doing what they’re supposed to do, but still can’t make ends meet. As we begin to climb back from the pandemic, we need meaningful public policy change, not just to get us back to where we were, but to truly lift people out of poverty and create a path to financial stability. The EITC is a readily available tool to help us take a significant step in that direction. Not only is it impactful, but prior to its gutting in 2010, it has traditionally enjoyed broad bipartisan support.
In 2010, the state legislature cut Michigan’s EITC by 70 percent as part of a reform package designed to lower business taxes. The impact was immediate as working families saw their tax bills go up and their ability to pay for essentials like food, clothing and transportation go down. Now is the time to correct that mistake and restore, if not increase, Michigan’s EITC.
This credit benefits working people across every county and community in Michigan. If doubled, the state EITC would put more than $200 million in tax refunds back in Michigan workers’ pockets each year. If restored to the pre-2010 level, it would mean over $450 million in refunds. This isn’t just good for working families, but it would drive dollars into small businesses and local economies that need it the most. In fact, studies show that for every $1 brought into a community through the EITC, $1.67 is generated in new economic activity. An increase to this tax credit would provide a vital boost to households and businesses that would help alleviate the economic hardships created by COVID-19, and provide lasting and meaningful impact beyond the pandemic.
We know the economic effect of this crisis is far from over and working families need increased support as we get through this together. The EITC can play a key role in stabilizing family budgets and helping small businesses both in the near and long-term. We encourage Governor Whitmer and lawmakers to put the EITC at the top of their priority list this year and invite members of the community to share messages of support for increasing the EITC by visiting StandWithUnitedWay.org.
Vice President, Basic Needs, Health, and Outreach