Low Income Case Study

To lessen college costs, Michigan legislators need to fortify low-income families’ liquid assets by directing state-level EITC credits to those families. Combining average EITC returns of $2,387 with their MET savings, poor families will move further towards managing college fees. As Section 20 of the MET states, “the [contract] purchaser may deduct from taxable income the amount of payment made under...contract.” Given the flexible structure and gubernatorial endorsement of the MET, this legal provision signifies that state politicians are willing to augment their constituents’ low incomes and actively close financial aid loopholes. In this fashion, one policy expert observed that “states have also used EITCs as vehicles for easing regressive tax increases and budget cuts that disproportionately affect lower-income families.” Essentially, at the state level, low-income families and other taxpayers receive small but significant refunds after paying income taxes to compensate for high living costs. Observing that Michigan Act 134 (2009) extends 529 tax benefits to persons other than account holders, one can see that the explicit incorporation of supplementary EITC refunds into MET payment plans is underway. As Washington University analysts concluded: …show more content…
An especially promising opportunity is to connect college savings with tax refunds that might include a state Earned Income Tax Credit (EITC). The goal is to make it very easy to use existing cash flows to save money in a 529 plan.
Working with the existing policy frameworks of income tax credits, MET college savings plans will soon fund low-income account holders to pay benefactors’ tuitions, incorporating more low-income students into college life. These added credits, when combined with MET savings, may begin to cover college living costs for low-income