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New Report: Michigan Economy Is Moving "Significantly Backward" By Hiking Taxes on the Poor

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The Center on Budget and Policy Priorities, one of the nation's premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals, released a report that concludes Michigan is one of just three states in the country that has "moved significantly backward" in the area of taxing the poor. Michigan, Wisconsin and New Jersey have raised "taxes on low-income working families in order to finance tax cuts that benefit corporations and wealthy individuals," the study reveals.

It should be noted that all three states are headed by Republican governors. Voters attempted to recall Michigan's governor, but that drive was unsuccessful. In Michigan, thus far, one Republican legislator has been recalled. In Wisconsin multiple Republican legislators have been recalled and a drive was launched on November 16, 2011 to collect signatures to put the question of whether to recall Governor Scott Walker on the ballot. The recalls were launched, in part, because of tax policies that increased the tax burden on the two state's struggling poor and middle-class workers.

According to the group's website, "The Center on Budget and Policy Priorities conducts research and analysis to help shape public debates over proposed budget and tax policies and to help ensure that policymakers consider the needs of low-income families and individuals in these debates.  We also develop policy options to alleviate poverty. Over the past 30 years, the Center has gained a reputation for producing materials that are balanced, authoritative, accessible to non-specialists, and responsive to issues facing the country.  Our materials are used by policymakers and non-profit organizations across the political spectrum, and by journalists from a wide variety of TV, radio, print, and online outlets."

While Michigan's governor has repeatedly claimed hiking taxes on the poor will help revive the state's economy, researchers at the Center on Budget and Policy Priorities strongly disagree. Their report, titled "The Impact of State Income Taxes on Low-Income Families in 2010," cites Connecticut as an example of a state where it is possible to "go in the opposite direction -- raising revenues overall while improving tax treatment of the poor." In Michigan, low-income families will lose close to $260 million in tax breaks beginning in 2012, while the state's small businesses will enjoy $1.1 billion in tax breaks beginning in January 2012. Those tax breaks will increase to $1.7 billion in 2013.

While Snyder's proposed 2011 budget called for the elimination of the Earned Income Tax Credit for working poor families in Michigan, and subsequently reduced the credit from 20 percent to 6 percent, in 2011 Connecticut's elected officials "enacted a new EITC while balancing its budget with a combination of spending cuts and new revenues," the study reveals.

The most striking conclusion in the analysis of state tax policy by the Center on Budget and Policy Priorities is that "states need not dismantle policies designed to reduce poverty and encourage work. Rather, they should preserve these policies and build upon them when their fiscal situation improves."

Sara Wurfel, Governor Snyder's spokeswoman, emailed a response to the report. In it she writes that Snyder finds it unacceptable that Michigan's families "are among the poorest in the nation." Wurfel's email says the tax changes aim to make the state's tax policy "simple, fair and efficient."

Michigan's governor may find the poverty of his state's families "unacceptable," but the fact remains that over the course of the past year he has been in office, there have been significant increases in Michigan's childhood poverty, hunger and infant mortality. In fact, four days after the Annie E. Casey Foundation released a study that revealed there had been a sharp increase in childhood poverty in Michigan, Rick Snyder responded by releasing details of an upcoming junket to Asia.

Snyder's response to the results of this latest report is equally detached from reality: Sara Wurfel claims> that raising taxes on some of the country's poorest families was "about a level playing field for all industries and sectors. It was about creating a structurally balanced budget that could be a building block for the future."

The Center on Budget and Policy Priorities report contradicts that argument: "Research increasingly makes clear that raising the after-tax incomes of poor families can boost poor children's chances of academic success and increase their earnings prospects as adults.  In other words, relieving poor families of state income taxes can make a meaningful contribution toward 'making work pay,' and can help states cultivate the highly skilled workforce they will need to succeed economically in the future."

"More and better jobs are at the heart of the governor's plan to improve and strengthen our economy so ALL can prosper and benefit," writes Wurfel.

Over the past 10 months Rick Snyder has been in office, Michigan's jobs picture has worsened significantly, according to data from the U.S. Bureau of Labor Statistics. When Snyder assumed office in January 2010, the state's unemployment rate was 10.7 percent; it has since risen to 11.1 percent. Over the past 10 months 255,000 additional people have become unemployed.

Wurfel says: "His overall plan aims to help address and reverse that trend. He's also worked hard to ensure essential and solid safety net services that lower income individuals rely on, like protecting Medicaid access and services," she said.

A September 2011 piece by Public Radio titled "Michigan's Safety Net Shrinks," paints a somewhat less rosy portrait of Michigan's safety net than does Ms. Wurfel on behalf of the state's governor, who spent over $11 million dollars running for office in 2010, $5 million of which was his own. Jim Crisp, executive director of the Michigan Community Action Agency Association, which connects people with Low Income Home Energy Assistance Program (LIHEAP) assistance, told Think Progress in August of 2011 that "Michigan's social safety net is already developing gaping holes. We've seen reduction of the Earned Income Credit. We are looking at the loss of [the state Low Income Energy Efficiency Program], and a 50 percent reduction in LIHEAP."

As much as Michigan's governor wants the state's residents to believe that hiking taxes on the state's poor and giving multi-billion dollar tax breaks to business will revive the state's economy, results of this report from the Center on Budget and Policy Priorities conclude that such tactics have little hope of doing so and, in fact, are moving Michigan's economy "significantly backward" instead.