Whitmer to propose tripling tax credit for low-wage workers
LANSING, Mich. (AP) — Gov. Gretchen Whitmer will ask lawmakers to triple Michigan’s tax credit for low- and moderate-income workers, putting on average an extra $350 a year into their pockets.
The proposal, which is to be unveiled in her annual State of the State address, would restore the state earned income tax credit to 20% of the federal credit. It was scaled back to 6% a decade ago as part of a Republican-written law that slashed business taxes.
The refundable credit helps more than 730,000 families a year. In the 2019 tax year, they received an average credit of $150. It would rise to roughly $500 under Whitmer’s plan, which was reviewed by The Associated Press in advance of her Wednesday speech.
“Michiganders who work hard every day to provide for their families deserve a break and a bigger tax refund,” says a summary document prepared by Democratic governor’s office.
Whitmer, who is up for reelection, also plans to call for gradually ending the state’s so-called retirement tax — which was another facet of the tax overhaul enacted by then-Gov. Rick Snyder and the GOP-controlled Legislature in 2011. Details were first reported by the Detroit Free Press on Sunday.
Whitmer’s tax changes, if passed, would come as Michigan’s two main revenue funds are projected to take in $5.8 billion more than previously estimated over three fiscal years.
This is not the first time the governor is getting behind tax breaks for retirees and lower-wage workers.
When she took office in 2019, she proposed doubling the earned income tax credit as a way to offset the impact on low-income workers of a 45-cents-a-gallon fuel tax increase. She tried reinstating the tax exemption for pension income — a campaign pledge — to boosting taxes on certain businesses.
None of the tax proposals advanced.
Now, though, there may be momentum for election-year tax relief in some form. House Republicans said last week they plan to make it a priority in their budget plan, citing the effect of inflation on family budgets. Last month, Senate Republicans introduced a bill that would lower the personal and corporate income tax rates to 3.9%, from 4.25% and 6%, and create a $500-per-child tax credit.
Supporters of the state earned income tax credit, predominantly Democrats and groups that advocate for the poor, have said it helps low-income people pay their bills and buy groceries and other necessities. At a December legislative hearing, small business and restaurant associations also backed an increase in the credit by saying it would encourage people to return to work in the pandemic.
“The Michigan EITC is a win-win investment that resonates in all counties and political districts, benefits rural and urban residents, and supports families while getting spent at our small businesses and in our local communities,” said Monique Stanton, president and CEO of the Michigan League for Public Policy.
To claim and qualify for the federal and state credits, a single filer with no children can make up to $21,430. The cutoff for married joint filers with three or more children is $57,414.
If the credit exceeds the taxes owed, recipients get a tax refund.
Proponents of taxing retirement income have contended that retirees should pay their share rather than push the burden onto younger residents. Once they turn 67, they get an exemption of $20,000 for a single filer and $40,000 for joint filers, regardless of whether the money comes from retirement income or a job.
Sen. Tom Barrett, a Charlotte Republican who is sponsoring legislation to repeal the “pension tax,” welcomed the governor’s proposal, saying it could make an “enormous difference” for seniors.
“It is unfair to those on a fixed income to bear this additional burden of taxation on previously earned benefits,” he said.
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