Michigan Budget Update: EITC Woes and Tax Equity for Non-Elderly Taxpayers

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Michigan lawmakers are currently operating under a temporary budget that should last until the end of the month. But K-12 education funding wasn't included in this temporary measure and Michigan's budget director said that a K-12 budget had to be signed by tomorrow if the state was going to make payments to local school districts. The state's Department of Education released a statement Monday saying that without a state budget, they can't get federal funds that help pay for special education and programs that benefit students living in low-income districts.

At around midnight on Thursday, lawmakers approved a K-12 education budget that reduces spending by $165 per pupil rather than the proposed $218. The Senate voted to pay for the increased education spending by freezing the state's Earned Income Tax Credit (EITC) at 10 percent of the federal credit (the credit was scheduled to increase to 20%) and reducing the state's film tax credit. The Governor is expected to sign the K-12 budget into law. But the fate of these revenue raising provisions isn't certain in the House, which won't meet again until Tuesday.

Instead of chopping away at one of the most successful anti-poverty programs in the country during a recession, the EITC, lawmakers should turn to eliminating some of the special tax breaks that Michiganders over the age of 65 enjoy. Late last week Brian Dickerson, a columnist for the Detroit Free Press, wrote, "I'm not convinced that Michigan needs to start kicking senior citizens out of their hospital beds. But we should certainly tax some of them more heavily, especially if we want their grandchildren to inherit a viable state."

The Michigan League of Human Services recently released a brief which raised the insightful question: Can the state really afford the generosity offered the elderly through the state's tax code? Read the brief here. Estimates are that preferences cost the state well over $650 million annually and the cost will likely increase as the population ages.

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