On September 22, 2006, Governor Granholm signed into law a state Earned Income Tax Credit (EITC) for Michigan. This new tax credit, passed with bipartisan support, will help working families keep more of their paycheck. It will reward work, supplement low wages, and help a segment of the state’s population that has not benefited from other recent tax measures. The Michigan EITC will go into effect in the filing season for Tax Year 2008.

Here are some facts about Michigan’s new earned income tax credit:

1)      The new tax credit is refundable. This means that each person claiming the credit receives the full amount of the credit even if it exceeds the person’s tax liability. Some workers who are liable for no Michigan income tax at all (because their earnings are too low) will get a refund through this tax credit.

2)      The Michigan earned income credit is based on the federal earned income credit. In Tax Year 2008, the first year that Michigan workers can receive the credit, their refund will be 10 percent of their federal EITC amount. In each year after that, it will be equal to 20 percent of the federal credit.

3)      Because all families who are eligible for the federal credit will be eligible for the state credit, the new tax credit will put money into the pockets of hundreds of thousands of Michigan working families. In Michigan last year, over 639,000 families (14 percent of tax-filing families) received the federal earned income credit.

4)      The new state EITC will bring more than $214 million into the economies of local communities throughout Michigan.

Peter Ruark

Michigan League for Human Services

1115 S. Pennsylvania Ave., Suite 202

Lansing, MI 48912

Phone: (517) 487-5436

Fax: (517) 371-4546

Website: http://www.MiLHS.org