Jacobs: Don’t pave roads on the backs of the poor

Gilda Z. Jacobs

Raising taxes on the lowest-paid Michigan workers to help pay to fix roads is a shortsighted idea that amounts to robbing poor Peter to pay Paul. Yet that’s exactly what the new House Republican road plan would do. Advocates of that plan would raise taxes on 820,000 working families by eliminating the state Earned Income Tax Credit.

The Michigan EITC, which enables working families to keep more of what they earn to afford the basics, would barely contribute to the $1 billion lawmakers want to raise. It saves all of $117 million a year. That’s a drop in the bucket for the state, but a crucial support for the families of the one million Michigan children who use the credit to help pay for transportation and child care.

If lawmakers eliminate the Michigan EITC, it would be the second time in five years that they have raised taxes on low-wage working families. In 2011, lawmakers cut the credit by $285 million while at the same giving big businesses a $1.65 billion tax break.

The Michigan EITC is one of the state’s most effective tools for building economic security. It increases work effort and strengthens Michigan’s economy by enabling working families to keep more of their income and take steps toward self-sufficiency. It means they have more to spend in their communities at local businesses. Most EITC recipients claim the credit only temporarily when a job disruption or other significant event reduces their income.

At its previous level of 20 percent of the federal EITC, the state credit can lift more than 20,000 working families above the poverty line and ease hardship for hundreds of thousands more. At the current 6 percent it still lifts about 7,000 working families above poverty. And the EITC has long-lasting, positive effects on children, helping them do better and go farther in school, and work and earn more as adults.

Late last year, Michigan lawmakers approved restoration of the state EITC to 20 percent, if voters had approved the penny sales tax increase on May 5 to pay for needed road repairs and to support schools. Now they propose to eliminate it to help pay for roads.

Lawmakers should abandon efforts to repeal the Michigan EITC and instead restore the credit to its previous level. Michigan would be much better off for it.

Gilda Z. Jacobs is president and CEO of the Michigan League for Public Policy.