Nineteen states, the District of Columbia, and the federal government currently offer an Earned Income Tax Credit, or EITC. Now, it looks like Michigan is about to join their ranks. The EITC, first enacted on the federal level in 1975, is a tax credit that reduces the taxes that low-income working families pay. In many states the tax credit is based on the federal credit and refundable. The credit also acts as a wage subsidy for very low-income workers. During the past thirty-one years the EITC has expanded and it's a popular tax policy tool that has enjoyed broad-based bipartisan political support.
Because the EITC is targeted to low-income individuals, it provides less expensive tax relief for state governments especially when compared to broader-based tax cuts. In fact, Sharon Parks of the Michigan League for Human Services called the EITC the most successful anti-poverty tool in the country. Lawmakers in Michigan should be applauded for proposing this sensible and effective tax reform. For more information on the EITC, click here.