LANSING – The minimum income at which Michigan residents will have to pay taxes will fall below the poverty line under the recent changes in the state’s tax laws, according to a report by the Center on Budget and Policy Priorities highlighted Wednesday by the Michigan League for Human Services.
With the reductions to the Earned Income Tax Credit and Homestead Property Tax Credit, a two-parent family earning at the federal poverty line would see state taxes increase $678 in 2012 over what the family paid in 2011, the report said.
For 2011, the credits essentially allowed any family earning less than 134 percent of the poverty line to avoid state taxes. Under the changes, that taxable line will move to just below the poverty line.
“Unless we restore the EITC, Michigan will soon tax the working poor deeper into poverty, instead of helping families climb into the middle class,” said Karen Holcomb-Merrill, policy director of the Michigan League for Human Services. “Reducing income taxes for the working poor both encourages work and reduces poverty, while setting families – and our state economy – on the path toward a better future.”
Michigan, in 2011, was one of 16 states that provided refundable tax credits to families living below poverty, compared to 15 states that taxed at least some families in that income range.
New Jersey and Wisconsin also reduced their EITC for the 2012 tax year, though not as substantially as Michigan did, the report said.
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