News Release: Michigan Catholic Conference Hails New State Earned Income Tax Credit

(LANSING)—Creating a state Earned Income Tax Credit that piggybacks the federal credit will prove to be the best piece of legislation passed by the State this year, the Michigan Catholic Conference stated today as the governor enacted Senate Bill 453. The Conference cites the tax credit’s ability to bring financial relief to low-income working families who pay high marginal tax rates.

“The enactment of this legislation is an affirmation that the state can work in a bipartisan fashion to address the serious role that poverty plays in the life of Michigan residents,” says Michigan Catholic Conference Vice President for Public Policy Paul A. Long. “It is my belief that Senate Bill 453 will prove to be the best piece of legislation passed this year by the State of Michigan.”

Senate Bill 453 amends the Income Tax Act to allow taxpayers who qualify for the federal Earned Income Tax Credit, beginning after December 31, 2007, to claim a state credit worth 10 percent of the federal credit. Beginning December 31, 2008 and beyond, the taxpayer will be eligible to claim an additional 10 percent of the federal credit, making the final state Earned Income Tax Credit worth a total of 20 percent of the federal credit. In the 2004 tax year, 662,912 Michigan federal tax returns claimed $1.17 billion in credits.

Established in 1975, the federal Earned Income Tax Credit provides a refundable credit to low-income individuals and families to offset the burden of Social Security taxes, provide an incentive to make the transition from welfare to work, and to supplement earnings. The credit is equal to a percentage of the taxpayer’s earned income based on the number of children in the household, up to a certain amount annually adjusted for inflation. According to its supporters, the federal Earned Income Tax Credit lifts more children out of poverty than any other federal program.

Senate Bill 453, sponsored by Senator Nancy Cassis (R-Novi), was enacted today after both the Michigan Senate and the House of Representatives overwhelmingly passed the bill in a bipartisan fashion. SB 453 cleared the Senate 38-0 and the House of Representatives 103-3. According to the Center on Budget and Policy Priorities, 19 other states and the District of Columbia have Earned Income Tax Credits. Four of those states: Delaware, Maryland, New Jersey and Virginia, also have credits that are worth 20 percent of the federal credit, while another five states have credits higher than that amount.

For a Michigan family with two children and 37,000 in earned income, the value of Michigan’s Earned Income Tax Credit, if applicable for this year, would be approximately $880.

The legislation was signed into law today at the New Jerusalem Community Center in Flint, Michigan as Governor Granholm was joined by Senate Minority Leader Bob Emerson (D-Flint), who has advocated for the legislation for some 20 years, and MCC Vice President for Public Policy Paul Long.

Michigan Catholic Conference is the official public policy voice of the Catholic Church in this state.

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