June 2015

June 1, 2015

Upfront I need to explain that I have never been a fan of income redistribution, at the federal or state level, but I do feel that the the government has some responsibility to provide a safety net in society for those who legitimately attempt to make their way but simply can't earn enough to support themselves or their families.

In modern day parlance, those who are employed yet continue to struggle are often referred to as the 'working poor' among us.

It is estimated that nearly 32 percent of Michigan low-income families that work are considered part of the 'working poor' class that struggles to meet basic needs. This might also start to explain the 25 percent child poverty rate in this state. 

That’s why I found it particularly offensive that this group of Michigan residents could find themselves targeted in the latest proposal coming out of the Michigan House of Representatives where GOP House Speaker Kevin Cotter has put forth a plan to address the deteriorating state road conditions by eliminating the Earned Income Tax Credit (EITC).

The Michigan EITC was cut severely in 2011 when Governor Rick Snyder attempted to balance the budget following tax cuts issued to the business community under the guise of creating jobs – the results of which are subject to debate.

The federal government allows for an EITC and the state plan up until 2011 allowed for 20 percent of the value of the federal EITC to be recognized on state income tax returns. It was cut to six percent in the budget balancing act.

Of course, the EITC would have been returned to a higher level had the state income tax proposal on the May 5 ballot not failed so miserably, a bone thrown to legislative Democrats in late 2014 to gain votes when it came time to put the income tax hike for “roads” on the ballot.

As part of Cotter's plan, the EITC would be eliminated entirely, which would affect individuals making below $14,800 annually and families earning less than $47,747. On average, the annual average Michigan EITC amounts to $140 for families, not a great amount but at that level everything counts.

What is the driving philosophy behind the House Speaker’s plan? In large part, the make up of the Michigan House – growing more conservative with each election – and the long-term impact of term limits both contribute to off-the-wall ideology like we are seeing in the Cotter plan. 

It's the same twisted logic that drove the Michigan House late in 2014 to adopt a no-tax-hike proposal for the roads which many critics said drained money from the education system and from local governments.

With lawmakers limited to only three two-year terms in the house, and the growing cacophony from the far right fringes, our paid Lansing lawmakers are hesitant to make hard decisions that come with the job.

So you get plans like the Cotter proposal that would not only attack those with less political clout but would also tap restricted funds in Lansing, like those on the economic development front, including incentives for the film industry and the state’s tourism promotion. And then you get what is generally considered “fantom funding” ideas like capturing part of the projected growth in the general fund in coming years, even though Lansing does not have a good track record when it comes to accurately assessing what the future of funding holds.

The House Speaker's proposal does provide for some tax and fee increases at the pump, user fees on electric and alternative fuel vehicles and increasing the tax on diesel fuel. But on the whole, the latest proposal for fixing the roads falls short of a guarantee of a solid and steady stream of annual revenue into the future for assuring our road system is improved and then maintained beyond the short-term.

What's needed at this time is leadership in Lansing which involves making unpopular decisions when it comes to creating new revenue which most observers agree is needed if we are to get on top of the road problems in this state. We saw an inkling of leadership in the Michigan Senate last year when senators adopted a road plan that basically doubled the gas tax at the pump with increased revenues going strictly to road work, but then it moved nowhere in the Michigan House because of the political factors mentioned above.

It's time for both chambers in Lansing to bring forth a plan that would generate new revenue, without a vote of the people, to raise the estimated $1 billion needed annually to address the road problem. But that would require leadership unafraid to make tax and fee decisions without regard to the chances of re-election when their terms are up.


David Hohendorf
Publisher
DavidHohendorf@downtownpublications.com

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