To get a sense of what we mean by transformational, we have outlined below how the credit would impact the finances of four case families: the first table shows a single and two-parent household earning $25,000 annually, and the second table shows a single and two-parent household earning $50,000 annually. Each household has two children, one under the age of three and one between the ages of three and six, so they would receive a $7,500 credit ($5,000 for the younger child, and $2,500 for the child over 3 and under 6).

Before applying the WPTC, a single adult with two young children and $25,000 in work earnings would have a post-tax income of roughly $38,000. We arrive at this figure after the addition of roughly $15,000 in SNAP benefits, state and federal Earned Income Tax Credits, and the federal Child Tax Credit, and the subtraction of nearly $3,000 in income through payroll and income taxes. After applying this family’s $7,500 WPTC, their total net income rises to over $45,000. If broken down to an hourly basis for a full-time, full-year worker, this would amount to a raise of more than $3.50 per hour – a rapid boost in income that no workforce development program can deliver.

While the WPTC is sorely needed for this case family, note also how critical it is for those case families earning $50,000 from work. A single adult with two children earning $50,000 has a post-tax income of just over $46,000, just $8,000 more than the pre-WPTC income of the household earning $25,000 from work. This is the so-called “benefit cliff” at work. As work income rises, a household’s tax burden (payroll and income tax) increases while their public benefits (e.g., SNAP and refundable tax credits) decline. So this household, whose income from work already places them well-below the ALICE threshold (the United Way’s estimate of what a Michigan household needs to afford basic necessities), is left even worse off after applying taxes and public benefits.

Enter the Working Parents Tax Credit. After applying the WPTC, their post-tax income would rise back above their work earnings (~$54,000), providing a meaningful boost to help this household pay for basic necessities, including the high cost of childcare.

For all case families, it’s also worth noting just how far below the ALICE thresholds they sit, even with the addition of the WPTC. These households (and it should be noted that nearly 30% of Michigan households with children have incomes of less than $50,000) will continue to face challenges paying for basic necessities – but they will struggle a lot less with an additional $7,500 in their pockets.

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It is rare in Michigan right now, let alone in our country, to see unity behind policy initiatives. Recent polling of likely 2024 voters in Michigan found overwhelmingly strong support for a one billion dollar Working Parents Tax Cut (WPTC) to help parents raising young children afford household necessities like childcare.

Michigan Future was a leader in the effort to expand Michigan’s Earned Income Tax Credit – succeeding in 2023 with the expansion of the EITC from 6% to 30%. This was achieved by leading and organizing a statewide coalition of more than 230 organizations to advocate for this significant, life-changing tax policy that helps Michigan’s working families deal with ever-rising costs of necessities. The WPTC is the next step in the equation for a prosperous state where every hardworking parent has what they need to provide for their family.

Michigan’s success is dependent on ensuring our residents can thrive. As Michigan’s economy grows, so should the wages of residents. It’s that simple.

The WPTC is an example of a powerful policy that ensures the success of our economy by including residents in three thoughtful ways.

One, we are living in a time post-pandemic where there is near universal acknowledgement that young people need a lot more support than what they’re currently receiving. Holistic wraparounds and access to nourishing spaces is key. This is a need around the clock – both in-school and out-of-school, but costs money and as hard as families are working, achieving this access for our youngest Michiganders is still illusive for many.

Two, we are living in a time where residents want the independence to make their own choices. Michiganders need access to capital, and not always government programs, for support. We need to trust our working parents across the state, in cities and small towns and everywhere in between. The WPTC gives parents the freedom to choose the necessities to spend their money on.

Three, it’s about scale. While government programs are critical today, we are only helping 30,000 children through child subsidy. The WPTC is the only way to get to scale – helping an estimated 250,000 children in one year alone. Money for hard working families to invest more in their kids will have a multiplier effect on their educational outcomes and subsequently on the future prosperity of our state.

The last point I’ll make is about the price tag of this policy. The cost of the WPTC isn’t a “gotcha.” Voters on both sides of the aisle were asked about the cost and the majority of Republicans, Democrats and Independents agreed putting money in the pockets of Michigan residents was worth it. The WPTC is supported not only by families who would directly benefit from the policy, but by those without kids, with higher household incomes, residents over 50 and more.

We must continue to redefine support for working families, and the WPTC empowers parents to make the right decisions for their families and in turn strengthens the state. At Michigan Future, we understand the WPTC to not only be a good idea, but as a generation-changing policy for Michigan.

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