The Word from Lansing: Earned Income Tax Credit Beneficial for Working Poor

The Catholic Church speaks about the dignity of work, teaching that it is “a form of continuing participation in God’s creation” (USCCB, The Dignity of Work and the Rights of Workers). Work matters, especially to those struggling to make ends meet. One policy that has been critical to working, low-income individuals and families is the state Earned Income Tax Credit (EITC).

The state EITC has had a significant impact on workers and families in every county across Michigan. This refundable credit on state income tax began in 2006, allowing qualified taxpayers to receive twenty percent of its federal counterpart. In 2011, it was reduced to six percent of the federal credit, although advocacy efforts from Michigan Catholic Conference helped to save it from full elimination.

Recently, the state EITC been a topic of discussion in Lansing, as Michigan lawmakers have been searching for funding to fix the state’s crumbling transportation infrastructure. Although the State House approved a plan eliminating the credit, a similar version of the Senate roads plan did not cut the state EITC. Michigan Catholic Conference is pleased to see the Senate take this item off the table for the time being, as the state’s roads should not be paved on the backs of the working poor.

Since its inception, the state EITC has proven to be one of the most effective transitional supports in overcoming poverty while promoting employment and self-sufficiency. Combined with the federal Earned Income Tax Credit, this policy helped move about twenty-five percent of the working poor families above the Federal Poverty Level. In many cases, the policy improved family disposable income by a third. Research has shown the state EITC also provides economic benefits to local communities. For every dollar spent by an EITC recipient, $1.67 is generated in new earnings for Michigan residents (Anderson Economic Group, 2009). Recipients often spend their refund on items right in their home cities and towns, such as groceries, car repairs, school clothing for children, or rent and other bills.

Approximately 780,500 Michiganders received the state EITC during the 2013 tax year, with the average credit awarded equaling $140 (Michigan Department of Treasury, 2015). A family of four with an annual income of $16,300 received approximately $322. While the amount recipients receive may not seem large to some, this funding helps real Michigan individuals and families with basic expenses that they otherwise might not afford. Additionally, an April 2015 study in the American Sociological Review found the EITC helps remove the stigma around assistance because it requires individuals to continue working, and it increases feelings of social inclusion and upward mobility.

No policy lifts more individuals, families, and children out of poverty than the Earned Income Tax Credit. While the state EITC is not a poverty cure-all, it is an important piece of the solution and should be expanded, not eliminated.

More work must still be done to address economic and employment issues for families. Pope Francis has called for actions to address the structural causes of poverty and “heal our society from an illness that can only lead to new crises.” With twenty-five percent of the state’s children currently living in poverty, this call is especially relevant. As individuals and institutions of faith hearing this call, let us explore ways we can promote the dignity of work and assist those most in need.