From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.


And I'm Robert Siegel.

Cutting taxes on the rich while raising them for the poor, that's what anti- poverty groups say some states here are trying to do as they struggle to balance their budgets. But governors say they're doing what they have to to create jobs and rein in deficits.

NPR's Pam Fessler reports.

PAM FESSLER: Many states give working poor families something called an earned income tax credit, similar to what they get on their federal taxes. But now, several states want to cut or eliminate the break.

RAMONA SPENCER: Four hundred dollars may not seem like a lot to a lot of people. But when you are already living on the bottom rung of society, you feel the difference.

FESSLER: Ramona Spencer is a single mother of five who lives in Lansing, Michigan. Spencer says she used the credit last year to buy glasses for her disabled adult son who she cares for.

SPENCER: My son would either have to go without the glasses, or we would forgo doing other things. We would literally not have the gas to go or maybe not be able to pay one of our utilities.

FESSLER: But in some ways, Michigan is in the same boat as Ramona Spencer. Money is tight. The state faces a $1.8 billion deficit. And Republican Governor Rick Snyder recently told reporters that eliminating the EITC would save $340 million.

RICK SNYDER: We're in a severe budget situation. And when you looked at the priorities of what we could do, my view is, is let's help people on the very front end, on the safety net feature, and work hard to make sure we're keeping those programs in place.

FESSLER: He said his budget would preserve other safety net spending such as Medicaid and welfare. But anti-poverty advocates note that Snyder also wants to cut business taxes $1.8 billion.

Gilda Jacobs, the CEO of the Michigan League for Human Services.

GILDA JACOBS: How does this make sense in terms of shared sacrifice?

FESSLER: She says eliminating the EITC will push 14,000 Michigan children into poverty and hurt the local economy because the poor tend to spend the money they get quickly on things such as housing and food. So why does she think the credit's been targeted?

JACOBS: The people that receive the EITC, they don't pay high - expensive lobbyists, so they're easy pickings.

FESSLER: But Governor Snyder says it's really about creating jobs in a state with severe unemployment. Wisconsin Governor Scott Walker has also proposed trimming his state's EITC. And New Jersey Governor Chris Christie last year proposed, and the legislature adopted a cut in that state's credit. Kansas and North Carolina are looking at similar proposals.

Nick Johnson of the Center on Budget and Policy Priorities in Washington says it's odd because the EITC has long been favored by both Democrats and Republicans. One reason is that it only goes to people who work.

NICHOLAS JOHNSON: We're not necessarily talking about the very poorest of the poor. We're talking about working families who are trying to stay off of welfare, trying to avoid turning to the state for other kinds of help.

FESSLER: But the credit has also drawn criticism from fiscal conservatives, in part because it's refundable, which means that people can still get it even if they don't owe taxes because their income is so low.

MICHAEL L: Actually, it's a transfer payment is what it is.

FESSLER: Michael LaFaive is with the Mackinac Center for Public Policy, a Michigan-based think tank.

FAIVE: In order for them to spend this money, it first has to be taken from other people and business. So these transfer payments just effectively rob very productive people and shift it to lower-income individuals.

FESSLER: Ramona Spencer, who earns $13,000 a year teaching kids nutrition and gardening, takes issue with any suggestion that she's getting a handout. She's received direct government aid in the past.

SPENCER: That part's humiliating. Being able to get a credit is not. I feel like I've earned that, and I'm entitled to it. It is not a poverty handout.

FESSLER: Spencer just hopes the tax credit sticks around long enough that she can keep using it until she's able to earn enough money that she no longer needs any help at all.

Pam Fessler, NPR News.

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