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Tax break called key to aid poor State rethinks giving low-income residents a planned tax credit

Thursday, August 30, 2007

cricks@kalamazoogazette.com 388-8557

One way to combat poverty in Kalamazoo is to try to get more financial resources to low-income families, the head of the Kalamazoo County Poverty Reduction Initiative says.

Kimberly Crider, director of the initiative, said that making sure Michigan implements a state earned-income tax credit approved last year is a sure way to boost income for poor residents. That tax credit now is being reconsidered in the state Legislature.

Her suggestion comes as the U.S. Census Bureau reported this week that one in three Kalamazoo residents lives in poverty.

``Families are just struggling,'' Crider said. ``This is an opportunity that we have to put more resources in their pockets.''

She called the earned-income tax credit a tax break for the poor, designed to help low-wage workers. Even so, a state earned-income tax credit might provide modest help at best -- offering another $171 refund on average in 2008 for Kalamazoo residents eligible to claim it.

``They don't have to pay as much taxes and they can keep those resources and put it to better use, such as paying for food or medical bills,'' Crider said.

The state can build on what's happening at the federal level, she said.

``The federal earned-income tax credit has been demonstrated time and time again as an effective tool to lift people out of poverty,'' Crider said.

Kalamazoo is among the top 10 cities in the nation with 65,000 residents or more that have high poverty rates, according to statistics from the U.S. Census Bureau.

Kalamazoo's poverty rate stood at 24 percent as of the 2000 census and had crept above 30 percent by the Census Bureau's 2005 American Community Survey. It stood at 33.4 percent in 2006, the latest figure available.

The earned-income tax credit in Michigan was approved last year but hit a snag recently when state Sen. Nancy Cassis, R-Novi, introduced legislation that would keep it from going into effect until the state's economic condition improves.

She says Michigan can't afford to lose $290 million a year in tax revenue when the credit is fully phased in. Cassis, chairwoman of the Senate Finance Committee, sponsored a 2006 bill that put the tax credit in place.

But others, such as state Sen. Mark Schauer, D-Battle Creek, and the Lansing-based Michigan League for Human Services, said the tax credit is needed to help poor families.

Schauer, Senate minority leader, said it's unfair to withhold a tax break for poor workers while Michigan businesses continue to get tax credits.

``We should try to help families living on the margin to become economically successful,'' said Schauer, who said he will oppose any freeze on the tax credit.

Even so, the state's tax credit is modest at best.

Sharon Parks, vice president of the Michigan League for Human Services, said the state tax credit would be 10 percent of the federal credit in 2008 and 20 percent in subsequent years.

She said that allowing the state tax credit to take effect wouldn't affect the upcoming fiscal year's budget, which starts Oct. 1 and runs until Sept. 30, 2008.

The Michigan League for Human Services has done an analysis of who would be affected by the state tax credit by legislative district in Michigan based on 2004 numbers, the latest figures available, Parks said.

In the 60th House District, which includes the city of Kalamazoo, more than 6,700 people received the federal earned-income tax credit in 2004, Parks said. The average credit refund was $1,714.

If the state tax credit is implemented as planned, the average credit refund for residents in the 60th House District would be about $171 in 2008 and about $343 in 2009, Parks said.

The Associated Press contributed to this report.