EITC credit would help children in financial crisis

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A major new report has been released by United for ALICE, entitled “ALICE in focus: Children in financial hardship”. United for ALICE found that nearly one million children 17 or younger in Michigan – 44% of all children – lived in households with incomes below ALICE’s threshold for financial survival in the robust economy. and pre-pandemic Michigan of 2019.

ALICE stands for Limited Assets, Limited Income, Employed and is not necessarily related to poverty level.

In Kent County, 65,295 (41.7%) children lived in a household with an income below the ALICE threshold. In Ottawa County, 21,768 (31.3%) children lived in households with incomes below the ALICE threshold.

These households include families in poverty, as well as those who have been identified as ALICE. Michigan households below the ALICE threshold don’t earn enough to afford the essentials of housing, childcare, food, transportation, healthcare, a smartphone plan and taxes – the basics needed to live and work in the modern economy.

I want to focus on children living in a household below the ALICE threshold with at least one working adult. Approximately 642,000 Michigan children lived in an active ALICE household, meaning that 68% of all Michigan children are in ALICE households. Thus, more than two-thirds of children living in households that cannot afford basic necessities live in a household with at least one working adult.

In 2019, 1,515,000 Michigan children lived in households with at least one working adult. Thus, more than 4 in 10 (42%) Michigan children in working households lived below the ALICE threshold.

  • 173,000 of these children lived in a household with two adults, both working. This represents 23% of children living in a household with two adults, both working.
  • 266,000 lived in a household with two adults, one of whom worked, which represents 56% of children living in a household with two adults, one of whom worked.
  • 203,000 lived in a household with a working adult, or 72% of children living in a household with a working adult.

This data is consistent with Michigan Future’s findings that Michigan’s high ALICE rate is primarily caused by too many of us working in low-wage jobs. Nearly 6 in 10 jobs in Michigan pay less than what is required for a middle-class family of three ($47,000). That’s more than 2.5 million Michigan jobs in a robust economy that pays less than it takes to be a middle-class three-person household.

The pandemic has made it clear that these low-wage workers live paycheck to paycheck not because they irresponsibly buy “useless” luxuries, but because they work low-income jobs. wages that prevent them from paying for necessities. The reality is that most of those struggling economically, in good times and bad, are Michigan residents who get up every day and work hard to earn a living. Data from United for ALICE clearly indicates that many of these hard-working, low-wage workers are raising children.

What these low-wage workers need most is income, not programs. For the think tank I lead, Michigan Future Inc., that means starting with a big increase in the state’s Earned Income Tax Credit (EITC). The EITC expansion can help the 642,000 Michigan children living in working ALICE households. In fact, because the EITC’s definition of an eligible child is broader than United for ALICE’s, the EITC benefited 985,000 Michigan children in 2019.

  • The maximum federal credit for a household with one child is $3,618. Increasing the state match of the federal credit from the current 6% to 30% would increase the maximum state credit from $217 to $1,085.
  • The maximum federal credit for a household with two children is $5,980. Increasing the state’s match of the federal credit from the current 6% to 30% would increase the state’s maximum credit from $359 to $1,794.
  • The maximum federal credit for a household with three or more children is $6,728. Increasing the state match of the federal credit from the current 6% to 30% would increase the maximum state credit from $404 to $2,018.

The EITC provides simple and effective tax relief, primarily for Michigan working families raising children. It has long been one of the most important government anti-poverty programs for working families. Since the value of the EITC increases dramatically, while the value of other public benefits decreases, it also combats the benefit cliffs and taxes that exist throughout the public benefit system.

If we really want to achieve an economy that, as it grows, benefits all Michigan residents, and if we really want Michigan to be a place that provides equal opportunity for all of its children, we should do of a large expansion of the EITC a cornerstone of the state’s post-pandemic economic recovery strategy.

Lou Glazer is president of Michigan Future Inc.

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