Posted on 08/04/2015 5:59:43 AM PDT by MichCapCon
Michigan's Earned Income Tax Credit is a welfare-like program that transfers income from taxpayers to low-income wage earners who have little or no state tax liability. The costs vs. benefits of the program are hotly debated, but no one disputes that it does provide a real if modest benefit to working poor families.
In contrast, there are heated disputes about the value of the even larger amounts this state spends on corporate welfare programs administered by the Michigan Economic Development Corporation — and there are good reasons to believe they are a waste of money. Lawmakers should keep this contrast in mind as they wrestle with the still-simmering road funding issue.
The House has passed a road funding plan that eliminates the state EITC and redirects $117 million currently spent on it to road repairs. The Senate is poised to do the same, with an EITC repeal bill reported from committee and pending on the floor.
The House plan also transfers $187 million from the MEDC's corporate welfare programs to road repairs. The Senate plan, however, does not touch MEDC funding.
Leaders in both bodies are seeking a compromise plan, and a good starting point would be to embrace the MEDC cuts of the House plan.
“Michigan shouldn’t cut social welfare to pay for roads until every possible dollar has been wrung from corporate welfare programs,” said Joe Lehman, president of Mackinac Center for Public Policy. “The MEDC consumes hundreds of millions of dollars but almost never meets its lofty job claims. The deals are cloaked in secrecy and mainly benefit a few favored recipients. Shifting that money to roads would do far more for economic development than most of what they’re doing now.”
Not surprisingly, House Democrats voted against the part of the road package that cuts the EITC. They also voted against the corporate welfare cuts, which is less surprising than many might imagine. However, while the EITC is a core issue for Democrats upon which they're unlikely to budge, cutting MEDC subsidies might be another matter.
Michigan Capitol Confidential recently asked House Democratic Leader Tim Greimel, D-Auburn Hills, about a potential road funding deal in which the EITC would not be cut in exchange for Democratic votes on significant MEDC cuts.
“I don’t want to dive into hypotheticals, but House Democrats have been clear that Michigan needs a long-term solution that dedicates real dollars to roads, and doesn’t rely on smoke-and-mirrors trickery,” Greimel said. “Savings from reforms and cuts at the MEDC can be a part of that solution, and it is imperative that we preserve the EITC and not unduly burden low- to middle-income families.”
“The Republican plan to gut the EITC in order to generate a small fraction of the funding needed for roads is shortsighted,” Greimel continued. “According to the Michigan League for Public Policy, the state’s earned income tax credit lifts 7,000 working families above the poverty line and brings tax relief to 820,000 working families statewide. We believe that major reforms are needed at the MEDC to ensure transparency and accountability and to rein in corporate welfare.
“Retaining the Earned Income Tax Credit is a top priority for our caucus,” Greimel concluded. “The EITC has long had bipartisan support across the country due to its proven effectiveness as an alternative to welfare that rewards low- to middle-income individuals who choose to work.”
For now it appears that legislative Democrats are on the outside looking in regarding road funding negotiations. If that changes, the distinction between their stances on protecting the EITC and cutting MEDC subsidies could become critical to striking a deal.
Or we can do both at the same time!
#multitasking
If it were up to me, welfare to able bodied people would be directly tied to doing the work that needs to be done. If an able bodied person wants to get welfare they should be out there doing the work on the road.
If they are willing to put in a full 40 hours per week, giving them full welfare benefits would probably be cheaper than paying union labor.
Don’t corporations benefit from roads than people on Welfare?
Ok, I’m not schooled on Economics, but isn’t giving tax breaks to Corporations an incentive to stay in Michigan and employ more people?? But maybe these lawmakers would rather have more unemployed people anyway......oh yeah, they ARE Democrats.
We all benefit from the roads. However, nobody benefits more than people on social welfare. If they drive, the taxpayers buy their gas the same as we pay for their food and anything else they buy. It all comes to them by way of rail and road.
That doesn’t make corporate welfare any better, just different. Corporate welfare helps some companies over others that have to struggle against government backed competition.
I think EITC helps corporations too...especially the ones who make $100 pairs of jeans, $80 ball caps, and the latest smart phone. Just my observation of what the cashiers at the local gas station brag about buying with their ‘tax refund’.
Detroit shows the full benefits of social welfare.
Detroit also shows what happens when people think corporations are evil.
Only to a liberal would being permitted to keep some of your own money be considered “welfare.”
The very term “corporate welfare” is disingenuous in the context of tax breaks.
“Tax breaks are fine, selective tax breaks are corporate welfare. If you want to cut taxes then cut taxes across the board. Its also important to note that we’re not just talking about tax breaks, plenty of subsidies are also given.”
Well stated
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