by Scott McClallen
The joint Michigan House Appropriations and the Tax Policy Committee approved two bills aiming to provide a $1.7 billion tax break and spend $1.5 billion to pay down local government pension debt.
Rep. Matt Hall, R-Marshall, claims House Bill 5838 will grant relief to all Michiganders from 40-year-high inflation.
“Whether it’s at the gas station, grocery store, pharmacy, or many other places involving everyday necessities, workers and seniors are all feeling the impacts of inflation,” Hall said. “And they all need relief – not just some. Previous plans from the governor and the Senate have touched on some level of relief, but I feel we can go farther and do more for more people with the resources we have available.
The bill aims to provide $1.7 billion in annual tax relief by dropping the personal income tax rate from 4.25% to 3.9%. However, the House plan differs from the Senate GOP plan by not offering to lower the corporate tax rate from 6% to 3.9%.
Hall said the bill would fulfill the promise lawmakers made to Michiganders during the former Democratic Gov. Jennifer Granholm’s administration to return the income tax rate to 3.9%.
The bill also aims to exempt retirement income for people starting at age 62, instead of 67 and older, to $20,000 for individuals and $40,000 for joint filers. A separate retirement exemption could apply, exempting a person 62 or older with retirement income up to $40,000 for single filers or $80,000 for joint filers.
Democrats cried foul, saying they were only given the plan 12 hours before meeting, and alleged the plan benefits the rich much more than the poor, as a proportion of their income.
However, they had enough time to offer 25 amendments, all of which failed.
Rep. Julie Brixie, D-Okemos, questioned how much federal stimulus money Michigan will have to repay the federal government, implying that the tax cuts will violate federal spending rules.
None, Hall responded. He said the state would dip into a pot of new revenue from increased state tax revenue instead of spending federal money.
Democrats described the bill as a massive tax break for the rich but a tiny one for the poor since the tax cut return would be proportional to income.
Meanwhile, Republicans argued the plan gave needed tax breaks to all people after a government spending frenzy boosted the budget by billions – from a 2009 budget of $48 billion, which 13 years later has grown by $26 billion.
“People in our communities see the money that has been made available,” Hall said. “If we don’t help our many workers and seniors across Michigan with the resources we have available now, we’re never going to do it and problems that we are seeing during these tough times are only going to get worse.”
Michigan Freedom Fund’s Executive Director Tori Sachs applauded moving closer to a tax cut.
“State government has billions in surplus revenue, while the people of Michigan are struggling with rising prices and record inflation in the Whitmer-Biden economy,” Sachs said in a statement. “It’s time to give taxpayers long overdue relief. We encourage the House to pass this tax cut when it comes to the floor next week.”
House Bill 5054 aims to spend $1.5 billion in one-time funding to pay local governments’ pensions.
The Michigan Municipal League welcomed the passage of HB 5054.
“The economic capacity and strength of our ‘main street’ communities is at the core of a vibrant Michigan,” CEO and Executive Director Dan Gilmartin said in a statement.
“Thriving cities lead to strong regional economies and regional prosperity contributes to a healthy state economy. The action taken by the House Appropriations Committee today to pass HB 5054 strengthens the state at its very heart – our local communities. We thank Rep. Albert and Rep. Hall for their leadership and look forward to working with them and others to equitably help all Michigan communities and secure passage of this important legislation.”
HBs 5838 and 5054 now move to the full House for further consideration.
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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.
Photo “Matt Hall” by State Representative Matt Hall. Background Photo “Michigan State Capitol” by Brian Charles Watson. CC BY-SA 3.0.