Michigan Governor's Proposed Budget Slashes EITC and Raises Regressive Taxes to Address Budget Gap


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For a governor who claims to support progressive taxation, Michigan Governor Jennifer Granholm sure has a funny way of showing it.  Her recently released budget proposal would raise revenue by slashing the EITC while hiking taxes on tobacco, liquor licenses, and bottled water.  Her budget would also prevent the personal exemption from increasing as a result of inflation indexing, would levy a tax on vending machine purchases, would (very modestly) scale back the state's film tax credit, and would attempt to expand the sales tax to include a few more services -- such as live events and landscaping.  And to top things off, the Governor would use some of the money raised by these hikes to lower taxes paid by business -- specifically, by phasing out the Michigan Business Tax surcharge.

Overall, this package of tax changes is almost guaranteed to be grossly regressive.  Admittedly, the Governor is working within some pretty restrictive guidelines, established both by her own short-sighted campaign promises, and by the state's constitutional prohibition on creating a graduated rate income tax.  But a look at the types of solutions proposed by the Michigan League for Human Services (MILHS) is enough to show that there are better approaches to addressing Michigan’s recurring budget deficits.  Take a look at this recent statement from the MILHS outlining the ways in which "vulnerable people and the working poor are being asked to sacrifice to balance the budget" under Governor Granholm's proposal.

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