The Earned Income Tax Credit (EITC) is a tax credit for working people with low incomes.

It puts money in the pockets of workers who need it most while getting spent at local businesses on immediate expenses like utility bills, groceries, clothing and school supplies for kids, car repairs, and more.

About 750,000 Michigan households receive the EITC, helping residents in every part of the state — rural and urban areas and all counties and political districts — make ends meet.

Recent efforts at the state and national level are striving to boost the EITC’s benefits for Michigan workers and families even more.

For the second year in a row, the IRS will allow tax filers a “lookback” provision to calculate their EITC using either their 2019 or 2021 income, whichever is higher. That ensures work disruptions or job loss do not diminish residents’ credit.

In the American Rescue Plan Act (ARPA), Congress expanded eligibility for workers without children and eliminated previous age restrictions. An estimated 600,000 Michigan workers without children will benefit from the EITC expansion in ARPA this year.

While those provisions in ARPA are only temporary, the federal Build Back Better proposal would make the expanded EITC eligibility permanent.

Hope remains that a deal can be secured in the U.S. Senate to address the EITC and many other policy needs of Michigan and American residents.

Similar work is being done at the state level to improve the EITC.

On Dec. 8, 2021, the Michigan Senate Finance Committee held a hearing on Senate Bill 417, legislation sponsored by Republican state Sen. Wayne Schmidt to increase the Michigan EITC to 30% of the federal credit.

Under that legislation, the maximum state EITC would increase from $32.58 to $162.90 for workers without qualifying children and raise the credit from $150 to $750 for the average Michigan family. A variety of groups supported Sen. Schmidt’s bill in committee, including the Michigan League for Public Policy, the Small Business Association of Michigan, and the Michigan Restaurant and Lodging Association.

In her State of the State address last week, Gov. Gretchen Whitmer advocated for increasing the Michigan EITC. The governor has been a longstanding champion of the EITC during her time in the Legislature and in the governor’s office.

In her speech, Gov. Whitmer noted that raising the state EITC will help reach her goal of lifting 100,000 working families out of poverty and stands to benefit nearly 1 million kids — nearly half the kids in Michigan.

As a percentage of the population, rural residents are more likely to benefit from a larger EITC, and increasing the Michigan EITC would benefit approximately 2,290 families in Alpena County, 940 families in Presque Isle County, 840 families in Montmorency County, and 750 families in Alcona County.

Raising the state EITC could put hundreds of dollars more into local residents’ pockets while boosting economic activity in the four-county area by upwards of $2 million.

You can go to mlpp.org to find state and county fact sheets on the benefits of the Michigan EITC — and the uptick in impact on local households and businesses of increasing it.

The EITC has a strong history of bipartisan support and has always managed to do well amid interesting political dynamics. The federal EITC was signed into law in 1975 by President Gerald R. Ford, a Michigan Republican, and passed with a Democratic majority in Congress.

And the state EITC was created in 2006 with a Republican-led Legislature and signed into law by Democratic Gov. Jennifer Granholm.

With Michigan currently in another situation of shared power and Sen. Schmidt’s bill and Gov. Whitmer’s proposal, the EITC has another opportunity for bipartisan agreement.

The EITC is a proven anti-poverty tool that benefits Michigan residents and small businesses, especially during the pandemic, and we hope policymakers will continue the momentum and work together to pass a long-awaited increase to the Michigan EITC.

Monique Stanton is president and CEO of the Michigan League for Public Policy.