Will Michigan Cut Its EITC to Help Pay for Tax Cuts for Businesses?


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The battle pitting Michigan’s low-income families against big business is heating up.  Governor Rick Snyder is unabashedly supporting an elimination of the state’s Earned Income Tax Credit (EITC) to help pay for his $1.5 billion annual cut in state business taxes.  Snyder wants to replace the Michigan Business Tax with a 6 percent corporate income tax which will exempt most small businesses from paying any business taxes.   

Michigan, however, is not flush with cash to pay for such a cut. It has a $1.8 billion budget gap to close this year.  So, Snyder and other state lawmakers have turned to their state’s most vulnerable residents and are asking them to “share in the pain” to help plug the even larger budget gap that would result if the business tax cut plan is enacted. 

This week, State Senator Roger Kahn officially introduced a bill to eliminate the EITC because, he says, state residents "don't need it."

Michigan’s EITC costs around $350 million a year, which is around 20 percent of the cost of the business tax cut, and provides affordable, effective, and targeted assistance to more than 700,000 low- and moderate-income Michiganders.   These are the working families hit hardest by the economic downturn and who are also feeling the impact of several years of budget cuts to education and health services. 

The Michigan League of Human Services’ CEO released a statement on the proposal saying, “While we recognize the desire for everybody in the state to share in the sacrifice, poor people are being asked to be the sacrificial lambs. The Michigan Earned Income Tax Credit, which helps low- and moderate-income working households, should not be the first credit considered among Michigan’s $34 billion list of tax expenditures, including tax breaks for big corporations.”

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