Income tax

Business groups support expansion of working income tax credit

MACKINAC ISLAND — Business groups on Thursday backed legislation to expand a state tax credit for low-wage workers, backing a key aspect of Gov. Gretchen Whitmer’s budget plan that recently won legislative backing.

The earned income tax credit would increase from 6% of the federal credit to 20% under the Democratic governor’s proposal, where it stood before a Republican-enacted tax overhaul cut taxes on businesses and increased personal taxes ten years ago. Although she has unsuccessfully called for the credit to be increased since taking office, a multibillion-dollar revenue surplus has boosted the chances that it will be part of a package of tax cuts being negotiated.

Leaders of the Michigan Chamber of Commerce and the Detroit Regional Chamber urged lawmakers to make it a priority in the talks, saying it would help businesses struggling to fill jobs.

“It encourages people to go to work and helps working families pay for necessities,” Jim Holcomb, president and CEO of the Michigan Chamber of Commerce, said at a Mackinac Policy press conference. Detroit Regional Chamber Conference.

Detroit Regional Chamber President and CEO Sandy Baruah said the credit was the only tax cut proposal with broad support from major business organizations and lawmakers from both parties.

A bill sponsored by Republican Sen. Wayne Schmidt of Traverse City would gradually increase the refundable credit to 30% by tax year 2025. The average benefit would increase by $600, from $150 to $750 annually.

Eligibility for the credit, which the state added more than 15 years ago, is based on income. A single filer with no children can earn up to $21,430 that year and qualify. Married filers with three or more children can earn up to $57,414.

House Minority Leader Donna Lasinski, a Democrat from Scio Township in Washtenaw County, said the credit is “a proven mechanism for increasing labor force participation.” Michigan’s labor force participation ranks 41st lowest in the nation, according to a February report by Business Leaders for Michigan.

“It’s a tax cut that works for hard-working families and workers, works for small and large businesses to fill needed positions, and ultimately grows your economy in a positive direction,” Lasinski said.

A 20% earned income tax credit is included in a broader package of tax cuts that is on Whitmer’s desk but that the GOP-led Legislature has not negotiated with her. The bills would reduce income tax, increase the personal exemption, increase it for seniors, create a child tax credit, fully restore the credit for low-income workers, and revise and expand a break for disabled veterans. The legislation faces a likely veto as negotiations continue.

The expanded earned income tax credit has the support of advocates for the poor, nonprofit organizations, church groups, and the business community, including local chambers of commerce, the Small Business Association of Michigan and the Michigan Restaurant & Lodging Association.