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Published in Economic Development
State GOP lawmakers pass tax cut plan amid expected budget revenue windfall COURTESY PHOTO

State GOP lawmakers pass tax cut plan amid expected budget revenue windfall

BY Thursday, May 19, 2022 04:18pm

EDITOR’S NOTE: This story has been updated with new information as well as comments from the Grand Rapids Area Chamber of Commerce.

Republicans in Lansing have passed another election-year tax cut plan that would reduce the personal income tax, raise Michigan’s earned income tax credit, and create a $500 per-child tax credit.

The $2.5 billion plan lawmakers in the GOP-controlled state House and Senate rolled out Thursday follows Gov. Gretchen Whitmer’s proposal earlier in the day for an immediate $500 tax rebate to working residents.

The proposal passed the state Senate this afternoon on a 22-14 party-line vote. The House followed suit hours later on a 69-34 vote.

Whitmer, who in March vetoed a prior tax cut plan passed by Republican legislators and is expected to veto the new package, has been pushing for a reduction in taxes on retirement income and an increase in the earned income tax credit for low-income workers. The GOP plan introduced this week includes versions of both.

The latest Republican tax cut plan comes as both the House Fiscal Agency and Senate Fiscal Agency this week issued new forecasts showing state revenues trending higher for the present fiscal year and next year than previous forecasted in January.

“State government is awash with cash,” Small Business Association of Michigan CEO Brian Calley said in a Thursday afternoon briefing for members.

The GOP tax cut plan would reduce the state’s personal income tax rate from 4.25 percent to 4 percent. The proposal would cut state revenue by $581.3 million in the present fiscal year and $2.6 billion in FY 2022-23, according to a House Fiscal Agency analysis of House Bill 4568, which was under consideration today in the Legislature.

The Small Business Association of Michigan quickly supported the GOP proposal that would reduce the tax burden on small business owners, most of whom pay the individual income tax on income they receive from the business rather than the state’s corporate income tax, Calley said.

Calley called the tax cut plan “eminently reasonable” and said he’s hopeful “the governor will support the idea of taking some of this windfall that state government has received and returning  it back to the hard-working citizens of Michigan, including from our standpoint the entrepreneurs that create so much opportunity in every single community across our state.”

Whitmer earlier today said she would not support the Republican plan, which she said was “not a real plan,” according to a report by Gongwer news service.

“It is a massive move that they’re making, using some one-time funds without really regard for what it’s going to mean about our ability to invest in skills, to lure investment in Michigan, to invest in education,” Whitmer told Gongwer.

Whitmer’s expected veto would set up negotiations with GOP lawmakers over the next month and a half as the administration and the Legislature face a June 30 deadline to pass a budget for the 2023 fiscal year that starts Oct. 1.

“State government is sitting on massive surpluses. Responsible tax relief for citizens and businesses should be a priority for our elected officials in Lansing and we are pleased to see that discussion continue today,” Andy Johnston, senior vice president for strategy and strategic engagement for the Grand Rapids Area Chamber of Commerce, wrote in a statement to MiBiz. “As the Legislature and Governor work toward finalizing a budget, we urge them to make tax relief for small businesses and an increase in the earned income tax credit top priorities. In addition, we hope to see improvements made to our long term competitiveness through paying down debt, eliminating the Commercial Personal Property Tax and using one-time dollars to invest in transformational projects.”

Passage is expected yet today of H.B. 4568, which Whitmer is expected to veto, setting up negotiations with GOP lawmakers as the administration and the Legislature face a June 30 deadline to pass a budget for the 2023 fiscal year that starts Oct. 1.

The GOP plan also would raise the state’s earned income tax credit from 6 percent of the federal credit to 20 percent. Whitmer has proposed the same increase in the earned income tax credit.

Individual tax exemptions, now at $4,900, would increase by $1,800, and the exemptions for retirement income would increase by $1,800 per person from the present $20,000, or $40,000 for a couple, under the GOP plan.

In a letter to legislative leaders, Whitmer said a revenue conference Friday should indicate that the state “is expected to have additional revenue heading into Fiscal Year 2023” that starts Oct. 1. She proposed the $500 MI Tax Rebate Right Now as a way to provide immediate relief from high inflation.

“Let’s take advantage of our additional revenue to put money in people’s pockets and deliver real relief right now to taxpayers,” Whitmer wrote. “Michiganders need real relief right now. Let’s work together to put money in people’s pockets and lower costs.”

A coalition of community organizations and labor unions known as Fund MI Future today urged lawmakers to use one-time revenues investment in roads and schools, rather than tax cuts.

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Read 683 times Last modified on Thursday, 19 May 2022 19:58
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