State Legislatures in Michigan, New Jersey and Wisconsin are looking to reconcile their budget by eliminating tax breaks for the poor and lower-class, effectively raising taxes on those with the least amount to support them.
The Center for Budget and Policy Priorities revealed this week that these three states are considering raising taxes low-income working families while offering new tax-breaks to businesses and corporations.
In Michigan’s case, the lower class will lose about $260 million in tax break next year, while businesses will see $1.1 billion in new tax breaks in 2012 and $1.7 billion in 2013.
Up until 2008, Michigan was one of only five states that taxes a working family of four earning below $14,000, or about 70 percent of the federal poverty level. This harsh level of taxation ended when Michigan’s new state tax credit took effect in 2008, raising the level for taxation to $30,300 for a family of four.
Families qualifying for the Earned Income Tax Credit have been receiving about $430 a year from the credit. That amount will drop to around $130 in the next tax year.
At the same time, an estimated two-thirds of Michigan businesses will be exempt from paying corporate income taxes under the new business tax breaks.
“Instead of undermining efforts to reduce the tax liabilities of poor families, states should preserve the progress they have made and build upon it when their budget outlook improves,” The Center for Budget and Policy Priorities said in a statement.
Michigan Governor Rick Snyder initially advocated eliminating the Earned Income Tax Credit entirely, but conceding to lowering the credit from 20 percent to just 6 percent of the Federal EITC.
“More and better jobs are at the heart of the governor’s plan to improve and strengthen our economy so ALL can prosper and benefit,” Sara Wurfel, a spokeswoman for the governor, said, adding that the tax changes were part of an effort to make the system “simple, fair and efficient.”
“It was also about ending exorbitant business tax credits that were jeopardizing our future and ensuring a level playing field for all industries and sectors,” she said. “It was about creating a structurally balanced budget that could be a building block for the future.”