Left to right, State Representative Rachel Hood; State Senator Winnie Brinks; Program Manager Brenda Brame of the Kent County Tax Credit Coalition, a part of Heart of West Michigan United Way; Communications Director Alex Rossman and President/CEO Gilda Z. Jacobs of the Michigan League for Public Policy; EITC recipient and 2-1-1 employee Rebeca Arredondo; and Gerald R. Ford Presidential Museum Curator Donald Holloway participated in a press conference to promote the Earned Income Tax Credit.
LEGAL NEWS PHOTO BY CYNTHIA PRICE
by Cynthia Price
Legal News
The Federal Earned Income Tax Credit (EITC) was originally brought into being as President Gerald R. Ford faced an unusual economic dilemma.
As Donald Holloway, curator at the Gerald R. Ford Presidential Museum, explained in a press conference promoting EITC held at the Museum last Friday, the U.S. economy was experiencing both inflation and recession.
“Inflation indicates an over-heated economy, and recession means the economy needs a kick in the pants,” Holloway explained. So President Ford, in the wake of the 1973 oil crisis, had to address two problems whose solutions were pretty much opposite.
First, Holloway says, the Ford administration instituted the well-known WIN program – Whip Inflation Now – which encouraged saving and personal responsibility on the part of the American public, but was reportedly never intended to be the only governmental response to inflation.
As that wound down, Holloway says, Ford’s economic advisors suggested that recession should be the focus of his policies. The response was a tax cut bill that included the EITC.
The EITC is intended to reduce the tax burden (not through lowering the income figure but directly applied to the tax owing) of people of low income, and particularly those with children.
Holloway noted that one of the EITC’s early critics, Ronald Reagan, later expanded it when he was president, calling it “who deemed it “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”
States followed suit, generally setting a percentage of the federal credit for the state return.
At the press conference, held in conjunction with the Internal Revenue Service-sponsored national EITC?Awareness Day, Michigan League for Public Policy President and CEO Gilda Z. Jacobs noted that the original federal EITC was the creation of a Republican president and Democratic Congress, while the Michigan EITC came into being under a Republican House and Senate, spearheaded by former Senator Ken Sikkema from West Michigan, and signed into law by Democratic Gov. Jennifer Granholm.
Jacobs, herself a former legislator, commented, “Throughout its history, the EITC has had nearly universal support—by Democrats and Republicans, rural and urban residents, and businesses and workers. Expanding the EITC has strong public support, and carrying on the legacies of President Ford and my former colleague Senator Sikkema, West Michigan elected officials are again helping lead the way. We hope lawmakers from both sides of the aisle and across the state can work together to restore our state EITC, better support Michigan’s struggling families, and unleash more of the credit’s purchasing power in Michigan’s local communities.”
The state EITC was originally set at 20% of the federal credit but was reduced to 6% in 2011.
Now, as Jacobs cited, there is a move to bring that percentage back up. West Michigan legislators are supportive of that, and State Representative Rachel Hood joined the press conference, as did State Senator Winnie Brinks. Representative David LaGrand was unable to attend, but he is a supporter of the EITC as well, according to Michigan League of Public Policy organizers.
Rep. Hood was cosponsor of a 2019 bill to increase the percentage of federal EITC to 10% for the 2019 tax year, and 12% thereafter. The bill, whose primary sponsor was Rep. Kristy Pagan, was introduced but did not move out of the House Tax Policy Committee.
Part of that package was a bill that would allow people aged 18-24 to benefit (as opposed to current policy, which applies only to those 25 and over), which met a similar fate.
Rep. Hood said she is supportive of reintroduction of the percentage increase bill, and Sen. Brinks said she would support similar legislation in the state senate.
This all makes sense on a number of levels, because 14.5% of families in Kent County benefited from the state EITC, using 2017 statistics. That was 45,230 families who received an average $143 back, resulting in over 6.46 million dollars returned to the local economy, thus benefiting the families as well as local businesses.
At the press conference, a young woman named Rebeca Arredondo testified to the tremendous benefit she has received from the EITC. As a person who takes calls for the 2-1-1 system that connects people in need to community resources that address the needs, Arredondo said she was very aware of the effects of poverty, even among those working.
“I couldn’t finish college because I had bills to pay. My son was my priority after his father was gone, and without getting the EITC I don’t think I would have managed to keep my house. A lot of people are going through this, not just me,” she said.
That was supported by Brenda Brame, who runs the Kent County Tax Credit Coalition for the Heart of West Michigan United Way. That coalition, which offers free expert income tax return preparation as well as financial literary courses, has helped to obtain nearly $97 million in tax credits since 2002. Brame said, “That EITC credit can make a big difference in some
people’s lives.”
An EPIC-MRA 2019 poll indicated that, among Michigan active and likely voters, 61% regarded the EITC either very or somewhat favorably, while only 14% said they were very or somewhat unfavorable toward it.
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