Michigan Capitol | Susan J. Demas
GOP lawmakers moved quickly to pass a $2.5 billion tax cut plan through both chambers Thursday, while Gov. Gretchen Whitmer and other Democrats push her $500 rebate plan.
This is the second time this year that Republicans who control the Legislature and the Democratic governor have squabbled over tax policy during what’s already been a tense election year. Earlier this year, Whitmer vetoed GOP tax cut legislation, saying that it would cause a hit to education, public safety and other budget areas.
Whitmer has her own tax relief proposals of eliminating the tax on pension income and increasing the Earned Income Tax Credit (EITC) for working-class Michiganders from 6 to 20% of the federal credit.
Republicans have branded the new proposal as the “MI Family Inflation Relief” plan. Senate Bill 784, was introduced by Sen. Jon Bumstead (R-Newaygo), and House Bill 4568, was introduced by Rep. Matt Hall (R-Marshall).
The plan includes:
- A $500 per child tax credit for those under 19.
- Increasing the personal income tax deduction by $1,800.
- Raising the personal exemption for seniors 67 and older to $21,800 for individuals and $43,600 for couples and tying subsequent increases to the rate of inflation.
- Lowering the state income tax from 4.25 to 4%.
- Restoring the Earned Income Tax Credit from 6% to 20% of the federal credit.
- Ensuring 100% disabled military veterans and the spouses of those killed in action receive a 100% property tax exemption and setting a $2,000 cap for veterans more than 50% disabled but less than 100% disabled, while holding local governments harmless.
The plan was able to garner bipartisan support in the House, with a 69-24 vote, but was split along party lines in the Senate. Because the Senate did not get a two-thirds majority, the legislation is laid over for five days before the House can take it up.
Michigan’s next budget year starts Oct. 1 and GOP leaders and Democratic Gov. Gretchen Whitmer have not negotiated a budget deal yet.
State Rep. Darrin Camilleri (D-Brownstown Twp.) pointed to the rising inflation rates as to why he voted yes on the Republican-sponsored tax cut plan.
“As we have all felt the rising costs of daily goods and services across the state, I voted yes on tax relief for Michiganders today,” Camilleri said in a statement Thursday. “We need relief and this was the only plan in front of the legislature at this time.”
However, Camilleri said Whitmer’s $500 MI Tax Rebate Right Now plan is a “better idea.”
Whitmer’s plan would send a $500 tax rebate to Michigan’s working families to help ease the cost burden of food, gas and other expenses that have been worsened by the increased inflation.
One of the main differences between the two plans is when Michiganders would see the money in their bank accounts. If the GOP plan is approved, it wouldn’t go into effect until 2023. Whitmer says that under her plan, Michiganders would get relief “right now” if the Legislature approves it.
“While the causes are varied, from the invasion of Ukraine by Russia to ongoing supply chain challenges caused by the pandemic, the pain being felt by people is tangible,” Whitmer said in a letter to legislative leaders Thursday. “Let’s take advantage of our additional revenue to put money in people’s pockets and deliver real relief right now.… Michiganders are counting on us to work together to provide real relief right now, so they can pay the bills and put food on the table. Let’s draw on the grit and determination our working families show every day and let’s get it done.”
It’s not clear where Republican leaders and the governor are on budget negotiations or whether she will approve this tax cut plan, but Whitmer spokesperson Bobby Leddy said Whitmer is “eager to sit down with lawmakers on both sides of the aisle to negotiate details for the plan that everyone can agree on.”
“But one thing must be certain: we believe it should deliver immediate relief to families who have worked their tail off, paid their dues, and could use a little extra help right now,” Leddy said.
Senate Majority Leader Mike Shirkey (R-Clarklake) said in a statement Thursday that he hopes “this time the governor agrees to prioritize the people of Michigan and resist the urge to spend it on growing state government.”
“Government is the only winner when inflation and gas prices are at record highs,” said Shirkey. “The increasing costs of everyday necessities affects all of us, stretching family budgets thinner and thinner — especially for the working class and those less fortunate — while state government revenues soar higher and higher.”
Michigan is once again looking at a higher than expected state revenue, according to the Senate Fiscal Agency, estimating that the fiscal year will end with at least a $10 billion surplus. Fiscal leaders are meeting Friday morning to determine Michigan’s economic outlook at the Consensus Revenue Estimating Conference.
HB 4568 will be sent to the governor’s desk for consideration, while SB 784 will be taken up by the House after the five-day rule next week.
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