Significant tax credit would help working families make ends meet
Michigan Future, Inc., a non-profit think tank focused on rising income for all Michigan households, today called for enactment of the Working Parents Tax Credit that would provide households receiving the Earned Income Tax Credit (EITC) with a significant tax cut to help Michigan working families make ends meet.
“Michigan needs a new approach to improving the economic well-being of working families,” said Lou Glazer, president of Michigan Future, Inc. “It’s an unfortunate reality that in Michigan’s economy, far too many hard-working families are struggling. What these families, particularly those raising young children, need most is income, not programs.”
The Working Parents Tax Credit would provide EITC recipient households with children under six years of age and work earnings of at least $10,000 with a refundable tax credit of $5,000 per-child under the age of three, and a refundable tax credit of $2,500 per-child over the age of three and under the age of six. No household would receive a tax credit for more than three children. The proposal intends for payments to be made monthly and would cost an estimated one billion dollars annually.
The Working Parents Tax Credit would provide life-changing income for families raising an estimated 270,000 Michigan children under the age of six.
“Young children need a lot of love, lots of spaces to learn and plenty of resources to ensure they thrive,” said Angelique Power, a member of the Michigan Future, Inc. Board of Directors. “Money for hard working families to invest more in their kids will have a multiplier effect on their educational outcomes and subsequently on the future prosperity of our state.”
Detailed analysis of the benefit cliff by Michigan Future, Inc. found that lower-wage households with children realized very little income gain as benefits decline and taxes increase. This is particularly true for households with income between $20,000 and $40,000, where households net as little as $0.14 from each additional dollar earned.
For households raising young children, the Working Parents Tax Credit encourages work and provides a significant boost in income which can help families defray the cost of childcare and other necessities. The Michigan Association of United Ways estimates the cost of paying for necessities for a two-adult household with no children is $38,508; for a household of two adults and two school age children it is $62,928; and for a household of two adults with two preschool children it is $72,792. The cost of childcare is the main driver of the increased cost of raising preschool children.
“The Working Parents Tax Credit is a win for Michigan families raising young children, employers, and the Michigan economy,” said Glazer. “This tax credit is fair, targeting relief to those most in need, efficient, by being tied directly as an incentive to work, and simple, resulting in no new bureaucracy. At Michigan Future we believe that the state’s core economic value should be rising income for all, an economy that as it grows benefits all. Now is the time for Michigan to enact a Working Parents Tax Credit.”
More details of the proposal can be found by clicking here.
