by Scott McClallen
Michigan House lawmakers voted 56-53 on House Bill 4001, which aims to provide some tax relief, but also block an automatic, permanent tax break for all Michiganders triggered by an influx of money in state coffers.
The package would increase the earned income tax credit from 6% to 30%, reduce taxes on public and private pensions, and possibly provide a $180 check to Michigan tax filers.
Gov. Gretchen Whitmer celebrated the passage.
“The Michigan House just passed the biggest tax break for Michiganders in decades,” Whitmer tweeted. “This plan will put THOUSANDS back into the pockets of retirees and working families.”
The bill, along with Whitmer’s proposed $79 billion budget for 2024 would spend all but $250 million of the state’s projected $9.2 billion surplus.
The bill would retroactively divert $800 million in general fund revenue from fiscal year 2022 fiscal to the Michigan Taxpayer Rebate Fund and divert up to $500 million annually to the Strategic Outreach and Attraction Reserve Fund to attract large business projects.
The diverted funds would avoid triggering permanent tax relief set by a 2015 law. The bill Republicans passed required Michigan’s 4.25% income tax rate decrease to 4.05% if the state’s general fund grows faster than the inflation rate in any year starting in 2023.
Under the bill, the Michigan Housing and Community Development Fund revenue would increase by $50 million per year beginning in fiscal year 2022-23; and Revitalization and Placemaking Fund revenue would increase by $50 million per year in fiscal year 2022-23, fiscal year 2023-24, and fiscal year 2024-25.
Tensions were high in the Capitol on Thursday as Michigan Democrats and one Republican pushed through House Bill 4001 on Thursday, over the screams of Republicans who were denied speeches before voting.
The bill moves to the Senate, where Republicans adjourned the session while Democrats were caucusing to delay the vote and exact revenge on House Democrats for blocking Republican speeches before voting.
Republicans want permanent tax relief while Democrats who hold a bicameral majority as well the governor’s office want to send one-time inflation relief checks. Republicans say the check would only come out to about 50 cents per day and isn’t enough relief when the state is sitting on a projected $9.2 billion surplus.
If the bill took effect before April 18, each eligible taxpayer would be entitled to receive a rebate for the 2022 tax year. However, the proposed check amount is less than half of the $500 checks Whitmer pitched in May 2022 as relief for high gas prices.
Republican Floor Leader Bryan Posthumus, Assistant Republican Leader Andrew Beeler, and Assistant Republican Floor Leader Andrew Fink said in a joint statement that the Democrats weren’t acting transparently.
“This bill was written in secret, efforts were made behind the scenes to strong-arm members, and Republicans weren’t allowed to stand up for Michigan taxpayers and speak against this – violating our right to debate,” they said in a statement. “Democrats did all of this to prevent a permanent income tax rollback that would help make life more affordable for all Michiganders.”
David Guenthner, vice president for government affairs at the Mackinac Center for Public Policy, said the bill “steals” a tax cut from all Michiganders.
“House Bill 4001 steals a long-overdue permanent income tax cut from our state’s hard-working teachers, retail workers, barbers, first responders, and other middle class workers,” Guenthner said in a statement. “At the same time, it doles out another $1.5 billion to mega-corporations that do not need taxpayer dollars to expand, plus $150 million to politically-connected developers. Lawmakers should not hide behind a fig leaf of one-time rebate checks of $180 per family to distract people from their votes for this scam.”
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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 “Michigan State Capitol” by jasongillman.
