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Business groups want expansion of tax credit for lower-wage workers to be priority in budget talks

Crain’s Detroit Business
David Eggert
June 2, 2022

MACKINAC ISLAND — Business groups on Thursday got behind legislation to expand a state tax credit for lower-wage workers, backing a key facet of Gov. Gretchen Whitmer’s budget plan that recently garnered legislative support.

The earned income tax credit would rise from 6 percent of the federal credit to 20 percent under the Democratic governor’s proposal, where it was before a Republican-enacted tax overhaul slashed business taxes and raised individual taxes a decade ago. Though she has unsuccessfully called for boosting the credit since she took office, a multibillion-dollar revenue surplus has increased the odds that it will be part of a tax cut package that is under negotiation.

The leaders of the Michigan Chamber of Commerce and the Detroit Regional Chamber urged legislators to make it a priority in talks, contending it would aid businesses that are struggling to fill jobs.

“It provides an incentive for people to go to work and helps working families pay for necessities,” Jim Holcomb, president and CEO of the Michigan Chamber of Commerce, said during a news conference at the Detroit Regional Chamber’s Mackinac Policy Conference.

Detroit Regional Chamber President and CEO Sandy Baruah said the credit is the one tax cut proposal with broad support from major business organizations and lawmakers from both parties.

A bill sponsored by Republican Sen. Wayne Schmidt of Traverse City would gradually boost the refundable credit to 30 percent by the 2025 tax year. The average benefit would rise by $600, from $150 to $750 annually.

Eligibility for the credit, which the state added more than 15 years ago, is based on income. A single tax filer with no children can make up to $21,430 that year and qualify. Married filers with three or more children can earn up to $57,414.

House Minority Leader Donna Lasinski, a Democrat from Washtenaw County’s Scio Township, said the credit is “a proven mechanism to grow workforce participation.” Michigan’s labor force participation ranks 41st-lowest in the country, according to a February report that was released by Business Leaders for Michigan.

“That is a tax cut that works for working families and working people, works for businesses small and large alike to fill needed positions and ends up growing your economy in a positive direction,” Lasinski said.

A 20 percent earned income tax credit is included in a broader mix of tax cuts that is on Whitmer’s desk but which the GOP-led Legislature did not negotiate with her. The bills would reduce the income tax, increase the personal exemption, raise it for seniors, create a child tax credit, fully reinstate the credit for low-income workers, and revise and expand a break for disabled veterans. The legislation faces a likely veto as negotiations continue.

Expanding the earned income tax credit has support from advocates for the poor, nonprofits, religious groups and within the business community, including from local chambers of commerce, the Small Business Association of Michigan and the Michigan Restaurant & Lodging Association.

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