October 4, 2004

LANSING – An initiative spearheaded by the Granholm administration to urge more Michigan residents to file for their federal Earned Income Tax Credit (EITC) has netted $32 million more for state residents than the previous year.
 
The effort, led by Lieutenant Governor John D. Cherry, targeted low- and moderate-income residents who qualify, but often do not file for, the EITC.
 
“The EITC is one of our most effective anti-poverty programs,” Cherry said. “We increased filings by $32 million this year, meaning we brought in more than $1 billion in EITC funds to Michigan families who qualified. This translates into a modest boost in the state’s sales tax revenue as a part of this money is usually spent on taxable items.”
 
Independent research has shown that the average EITC recipient spends 37.9 percent of their credit on taxable items, which translates into an increase of $12.1 million in state sales tax revenue.
 
The Family Independence Agency (FIA) played a key role in helping inform Michigan citizens of the availability of the EITC and whether they qualified for it.

“The EITC is fundamental to helping Michigan citizens living in poverty to become self-supporting,” said FIA Director Marianne Udow. “It is our goal to build on the success of 2004 and expand our efforts in 2005 to help more Michigan citizens take advantage of the EITC.”
 
Detroit, where residents collected $227 million in total EITC filings, increased their filings by $4.6 million this year. Benton Harbor, where residents collected $10 million in EITC funds, increased their filings by $229,000 this year.

Additionally, Michigan is being seen as a model for other states for its outreach efforts. The Internal Revenue Service (IRS) has decided to adopt the Van Buren County model of rural coalition building for free tax preparation as a nationwide model for their Volunteer Income Tax Assistance program. The National League of Cities has adopted the Michigan cost-to-impact ratio tool for use in their EITC toolkit this coming tax year. Benton Harbor has been chosen by the federal Department of Health and Human Services as one of three nationwide pilot sites for a new initiative targeting Temporary Assistance for Needy Families cases.

The Michigan EITC initiative targeted four counties in its first year by providing outreach materials to employees in county FIA offices. The state also developed a web site and partnerships with several community groups and organizations, some of which offered free tax assistance to help workers file for the EITC. No General Fund expenditures were made to support the initiative.