Lansing Update: May 13, 2011

In This Week’s Lansing Update:

  1. Legislature Sends Governor 6% Earned Income Tax Credit
  2. Welfare Reform Measures Move to State Senate

Legislature Sends Governor 6% Earned Income Tax Credit

Michigan Catholic Conference this week enjoyed a significant legislative victory when the Legislature sent the Governor a bill that, in part, preserves the Michigan Earned Income Tax Credit (EITC) at six percent of the federal EITC.

The EITC has been a major policy position for the Conference as the credit does more to move low-income workers and their children out of poverty than any other policy.

MCC declared at the beginning of the legislative session that preserving the state EITC was its top priority after the governor and legislative leaders announced they would seek the elimination of the credit in order to reduce the state’s $1.7 billion budget deficit. While the state credit currently stands at 20 percent of the federal credit, the preservation of the EITC at six percent marks a tremendous achievement as elimination seemed foregone.

Recognizing throughout the legislative debate the support of State Representative Jud Gilbert (R-Algonac), chair of the House Tax Policy Committee, the Conference worked tirelessly through legislative advocacy and engagement with the news media to build support for preserving the EITC.

Despite the Speaker of House announcing in January that the majority caucus would seek to eliminate the credit, the House of Representatives on April 27 passed legislation to rewrite the state’s tax code that included a $25 per child credit for those who qualify for the federal EITC. While the amount was small, and did not benefit all low-income workers, the minimal credit helped to keep the debate alive as the tax policy legislation moved over to the State Senate.

In the Senate Lieutenant Governor Brian Calley and Senator Mark Jansen, chairman of the Senate Reforms, Restructuring and Reinventing Committee, supported the Conference’s position that approximately $105 million in tax benefits for the poor—through the $25 credit and Homestead Property Tax credits—could be dedicated entirely to a flat EITC. A majority of members supported the idea and, as the Legislature moved to enact a historic shift of the state’s tax code, the state EITC was preserved at the six percent level.

Michigan Catholic Conference will continue to advocate for an increased EITC as state revenues increase in the months and years to come. Ideally the credit will be restored to the original 20 percent level when revenues are available.

Welfare Reform Measures Move to State Senate

The House of Representatives this week sent legislation over to the State Senate that seeks to enact the most significant reform of Michigan’s welfare system since 2006. House Bills 4409 and 4410 passed with bipartisan support and, if enacted, will immediately remove 12,600 families from state assistance.

Michigan Catholic Conference has articulated its opposition to the bills and cited concern over the fact that the legislation does nothing to assist those families who will lose their last line of support. The Conference has also testified against proposed penalties, which includes a lifetime ban from assistance for those found in noncompliance on a third occasion. The current penalty is a two year ban.

While there are few carve-outs that benefit highly vulnerable populations, such as victims of domestic violence and pregnant women, the legislation would recognize a current pass for a first instance of noncompliance as a first strike—meaning the second violation would incur an automatic six month ban from assistance.

One component included in the legislation sought by the Conference is an increased income disregard, which allows those receiving assistance to work more hours and earn more pay while still being eligible for benefits.

HBs 4409 and 4410 await consideration from the State Senate, and are expected to be addressed by the Senate Families, Seniors and Human Services Committee.