LANSING – A revised tax policy, which will include a $25 per child credit for those persons eligible for the federal Earned Income Tax Credit, will help the poor in the state, Lt. Governor Brian Calley said Wednesday, as well as help remake the state to help Michigan businesses and attract new companies.

In outlining the proposal the legislative leadership agreed earlier this month with Governor Rick Snyder to the House Tax Policy Committee, Calley also more directly refuted some of the criticisms launched against the tax proposals.

Calley also said the administration would soon issue a proposal to deal with brownfield tax credits that local governments had urged be retained in the administration’s tax proposal. Snyder had initially called for eliminating those along with other business credits in his proposal to end the Michigan Business Tax and replace that with a 6 percent profits tax for “C” corporations.

But specifically to the proposal about the $25 per child credit, the Michigan League for Human Services said the proposal would still not help keep lower-income individuals from falling toward poverty.

The chair of the committee, Rep. Jud Gilbert (R-Algonac), said he hoped the committee would act on the entire tax proposal (HB 4361 ) next week, but that will depend on having a substitute bill drafted and submitted to the committee. “I want to proceed as quickly as possible,” Gilbert said.

He also said the revised proposal, with its change on taxing pensions, was making it easier for some members of the House Republican caucus to support the proposal.

Revising Snyder’s proposal to tax public and private pensions was the major change in the amended proposal and the one issue Calley spent the most time with before the committee.

The revised proposal would keep current retirement income exemptions in place for those persons 67 or older. Those between age 60 and age 66 would see a $40,000 joint retirement income exemption ($20,000 for single payers) that would become a similar dollar amount exemption against any income after turning age 67.

Persons younger than age 60 in 2012 would receive a new $20,000/$40,000 exemption, depending on their filing status, when they turn 67. The exemption could be applied to any income they receive.

Even though the proposal effectively ends the state’s current exemption on taxing most pensions, Calley said the state would still stand as the 8th most generous in terms of how it treats senior citizens.

And the proposal, which also delays the now scheduled October 1 rollback of the income tax rate to 4.25 percent until January 1, 2013, would mean Michigan is still the 14th lowest in terms of income taxes among all the states that assess such a tax.

The proposal also changes the state’s Homestead Property Tax Credit, which would allow those persons with incomes of $20,000 or less to get a 100 percent credit on the amount by which the property taxes on their homestead, or the credit for rental of the homestead for the tax year, exceeds 3.5 percent of the claimant’s household income for that tax year instead of the current 60 percent.

That the credit applies as well to taxes that a person pays through their rent is notable, Calley said, because many lower-income individuals pay property taxes through rent.

Calley said the proposal makes that credit more focused specifically on low-income persons. For those critics of the proposal worried about the proposed elimination of the Earned Income Tax Credit, the proposal allows for about $80 million of additional assistance to be targeted towards the poor and low-income, he said.

The $25 credit item came out almost as an afterthought, however, and only after Gilbert prompted Calley.

The credit would only be available to those who are already eligible for the federal EITC, Calley said. It would amount to a total of about $100 million in relief.

But in a release, Judy Putnam with the Michigan League for Human Services said the proposal, while helpful to the low-income, would still result in a major loss of tax benefits to those now receiving the state’s EITC.

For example, she said, a single parent with two children now earning $25,000 gets $511 back from the state under the current EITC. Under the proposal Calley outlined, that family would get $54.

Calley also criticized critics of the revised plan and Snyder’s first tax proposal, saying that they tend to blame all the problems in the state’s finances on the tax plan. But they forget or ignore that the state had a $1.5 billion structural deficit that had to be dealt with even after the business tax proposal was made.

Just making basic changes to the current tax structure, by lowering the rates, was not good enough to help begin turning the state around, Calley said.

“We’ve had 30 years of decline, really, and no one was willing to take a chance on Michigan companies,” he said. “And we’re willing to take that chance” to help boost jobs in the state.

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