Friday, Jan. 29, 2021, marked the 15th annual Earned Income Tax Credit Awareness Day.

The EITC is a federal tax credit available to families with low and moderate incomes. The credit is a proven anti-poverty tool that rewards work and helps workers pay for things like transportation costs or child care and other daily necessities. The EITC helps workers in rural and urban areas alike in a variety of industries, and benefits their kids as well.

And, because the credit is refundable, money is put back into local economies.

Michigan supplements the federal credit with its own state credit, but it’s one of the weakest state EITCs nationwide. It once was 20% of the federal credit, but is now just 6% after being cut in 2011. In tax year 2018, more than 2,270 families in Alpena County received an average state credit of $125, putting $283,100 back into the local economy. For that same year, 690 Alcona County families received an average credit of $131, 970 Presque Isle County families received an average credit of $134, and 860 Montmorency County families received an average credit of $128. This, in turn, put a total of $330,200 back into those counties’ economies.

But the Michigan EITC can and should do more. For 2018, fully restoring Michigan’s EITC to 20% of the federal credit would have meant around $300 more for each of these households, and a whopping $2 million back into the local communities they live in.

In December 2020, the federal government passed the EITC lookback provision as part of a comprehensive COVID-19 relief bill. That provision allows tax filers who were eligible to claim the federal EITC for 2019 to make a choice of whether to use their 2019 wage and self-employment income or their 2020 wage and self-employment income to calculate their EITC and/or Child Tax Credit, whichever allows them to claim the higher credit.

That is intended to limit COVID-19’s impact on a filer’s EITC, regardless of the pandemic’s impact on their income. The amount of the EITC is based on a person’s income and the number of kids they have, so the decision of whether or not to take advantage of the EITC lookback will be based on each taxpayer.

For those taxpayers who make less than $57,000 a year, Michiganders can take advantage of the Internal Revenue Service’s Volunteer Income Tax Assistance program to help prepare their taxes. That free resource is particularly useful for families who are eligible for the Earned Income Tax Credit or Child Tax Credit.

The lookback provision is a helpful way to strengthen the federal EITC’s impact during pandemic times, but there are also opportunities to better support EITC-eligible workers and families at the state level. To maximize the Michigan EITC’s benefit, the Michigan League for Public Policy continues to advocate for the following improvements:

* Restore the state EITC to 20% of the federal credit, a change that would have meant an average of $350 more per taxpayer and an extra $266 million back to the state economy in 2018;

* Expand the credit to students, caregivers, all immigrant workers, and workers not raising children in their home, all workers currently taxed into — or deeper into — poverty by our tax system; and

* Improve outreach to inform residents of their eligibility for the credit (nearly one in five eligible Michigan workers do not claim the EITC).

As COVID-19 has impacted our workers and economies in a variety of ways, we need to look at a variety of policy changes to help them. That includes looking at our state and federal tax policy.

As they already have with the lookback provision, our state and federal government can build on the EITC’s established positive impact on workers and families with lower incomes. The EITC can and should be used to do even more to offset the impact of COVID and other economic challenges on certain workers.