Michigan has long had programs in place to help low-income households. Food, housing, health care, day care, preschool, tax credits and more. These programs have traditionally been limited to those who truly need it, with eligibility based on income.
That is changing. Activist groups have pushed for years to expand social welfare programs to more people. They often exaggerate economic doldrums and broaden the definition of poverty to make their case. The bottom line is that expanding means-tested programs does nothing for those truly in need. It simply doles out benefits to wealthier and wealthier households.
Michigan Gov. Gretchen Whitmer’s recent budget proposals turbocharge this effort. She proposes expanding several government programs so they reach solidly into the middle class and even beyond.
Preschool: Michigan’s Great Start preschool program, and the federal government’s version, called Head Start, was once limited to low-income families. Eligibility for Great Start was expanded in 2011, so that families of four with incomes up to $75,000 are now eligible. Still, the number of children eligible and enrolling in the program has been falling for years.
Whitmer now wants to make the program universal. This requires expanding eligibility so that all households qualify for taxpayer-funded preschool. Since all low-income and many middle-class households are already eligible, the only beneficiaries of expanding the program will be the relatively well-off. Taxpayers will find themselves funding preschool for millionaires.
School lunches: Another budget proposal from the governor is free school lunches for all students. A federal program has long provided subsidized school lunches for families with incomes up to 130% of the federal poverty line, and discounted lunches available to those at nearly twice the federal poverty line. This is in addition to food stamps that low-income households qualify for, which they could use to buy food for their child’s lunch.
Whitmer proposes to have state taxpayers pay more so that all students, regardless of household income or need, get free lunches. Since the federal government subsidizes the cost of providing these meals to low-income families, state tax dollars will be used exclusively to subsidize lunches for households with middle and upper income levels.
Electric vehicles: The people most likely to purchase an electric vehicle earn an average of $150,000 per year. They tend to own a home, with an average value of $275,000. The federal government gives these electric car buyers a subsidy of $7,500 per vehicle. Whitmer that state taxpayers chip in another $2,000 on top of that. That’s nearly $10,000 in subsidies for almost exclusively well-to-do families. Whitmer has also supported $48 million in tax exemptions for EVs, $65 million for charging stations, more for other infrastructure and billions to the companies making vehicle batteries. It’s hard to imagine how even a single low-income taxpayer might benefit from this welfare.
College: Michigan primarily funds college by appropriating more than $1.5 billion to its 15 public universities. Little consideration is given to how well the funds are spent or how well students are served. This spending overwhelmingly benefits middle- and upper-income residents, as they are much more likely to attend and graduate from these universities. On top of that, Whitmer’s budget expands the Michigan Reconnect program to cover the cost of community college for anyone over 21, even for those from wealthy families that can afford to pay.
Tax policy: Michigan has a constitutionally required flat income tax, and its rate of 4.25% is set to fall to 4.05%. Whitmer also signed a new law that expands tax breaks for retirement income, fully exempting pension income. Senior households already have some of their income exempt from the tax — $20,000 for single-filers and $40,000 for joint filers. So the new pension exemptions apply only to people who earn more than that in retirement, which means the main beneficiaries will be relatively well-off retirees.
Corporate subsidies: In one month, the new Democratic-led Legislature pledged $3 billion of taxpayers’ money to a handful of rich corporations. That’s more than the state spends on local roads. It’s safe to say that corporate welfare is the top spending priority of this Legislature and a long-time priority of the governor. While these large corporations promise to create some new jobs, those are relatively few and might be offset by company layoffs elsewhere. Shareholders and company executives are the ones most likely to benefit.
The government, at the state and federal level, has long provided taxpayer-financed support for people with low incomes. Programs toward that end work best when they are carefully designed to give specific aid, targeted to people who need it. Exceptional programs also provide support and incentives for qualifying individuals to help them work their way out of poverty.
Although the programs Whitmer and the Michigan Legislature are pursuing are sold as poverty relief, they are something different altogether. They provide benefits once meant only for the poor to wealthier and wealthier households. This might be good politics — voters tend to like free stuff — but it’s bad public policy to provide taxpayer-funded benefits to people who don’t need them.
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