Editorial: Support tax credits that encourage work
One of the better ideas in Gov. Gretchen Whitmer's proposed budget is restoration of the Earned Income Tax Credit for low-income workers.
The credits were reduced by former Gov. Rick Snyder in 2011 as he restructured the state's tax and regulatory policy to make Michigan more competitive for jobs and investment.
While his changes worked to boost Michigan's economy, cutting the tax credits was a mistake.
Whitmer wants to fatten them, and the Legislature should work with her on that goal.
Michigan's credit is based on the federal version, which benefits workers with low- to moderate pay. Currently, the state credit is 6 percent of the federal tax break, down from 20 percent before the Snyder reductions. The credits apply to payroll taxes.
Whitmer wants to boost the Michigan rate to 10 percent in 2020, and then to 12 percent in 2021.
Few tax measures are as beneficial as the Earned Income Tax Credit because it encourages work and independence.
The credits remove the disincentive for those receiving public assistance to return to the workforce by helping assure their paychecks are equal to or greater than their welfare benefits.
They also encourage those workers to seek additional education and training to boost their skills and make them more employable. The credits particularly benefit families with children.
Basically, it's an anti-poverty program that helps individuals move from dependency to the workplace.
And that would benefit the entire Michigan economy. While the number is steadily improving, there are still too many eligible workers who are not employed or actively seeking jobs.
The state's workforce participation rate is 61.2 percent, slightly below the national average. In Detroit, however, the rate stands at just 53.4 percent, the lowest of any major city in the country.
State lawmakers have sought to encourage more residents into the workforce by tying Medicaid and other public assistance programs to employment or job training.
Those are necessary measures, given Michigan's low unemployment rate and shortage of workers.
Increasing the Earned Income Tax Credits would be an important step in furthering the goal, and one that uses a carrot rather than a stick.
The governor pitched the increased credits as a means of offsetting the impact of her proposed 45 cent fuel tax hike will have on lower-income families.
But even without the tax increase, boosting the Earned Income Tax Credit is a welcome idea.
A job is the first and most important step to fighting poverty. Using tax credits to assure it is more profitable to work and seek higher skills than it is to collect benefits is sound policy.
However lawmakers feel about the rest of Whitmer's budget, they should grab this piece and run with it.