by Scott McClallen
The Michigan Senate approved a tax bill to boost the earned income tax credit and reduce retirement taxes, but doesn’t include the $180 inflation relief checks touted by Gov. Gretchen Whitmer.
Republicans withheld the needed votes to issue $800 million worth of $180 inflation relief checks. In a Feb. 16 vote, Republicans again refused to give immediate effect to House Bill 4001 because they preferred permanent tax relief over a one-time check.
Senate Democrats hold a 20-18 majority but couldn’t get the 26 votes needed to enact the bill by April 18.
If approved with immediate effect, House Bill 4001 would have retroactively diverted $800 million in general fund revenue from fiscal year 2022 fiscal to the Michigan Taxpayer Rebate Fund.
The $800 million diversion would avoid triggering a 2015 law that drops the personal income tax rate drop from 4.25% to 4.05% if the state’s general fund grows faster than the inflation rate in any year starting in 2023.
The bill approved Tuesday night by the Senate aims to increase the EITC from 6% to 30% of the federal EITC beginning with the 2022 tax year and enact over four years an exemption on certain retirement income from the state income tax.
Whitmer said the plan will roll back the retirement tax to save 500,000 households an average of $1,000 a year and quintuple the Working Families Tax Credit to provide an average refund of $3,150 to of 700,000 Michiganders.
The bill would also allocate roughly $500 million annually for three years to the Strategic Outreach and Attraction Reserve fund, $50 million to a housing and community development fund, and $50 million to a revitalization and placemaking fund.
Democrats notched the bill as a win.
“Today, we are sending the governor the biggest, broadest tax relief plan Michiganders have seen in decades,” Senate Majority Leader Winnie Brinks, D-Grand Rapids, said in a statement. “This has the power to make a generational impact on the financial wellbeing of individuals and families in our state. With less than two months in the majority under our belts, Democrats are already delivering on our long-held promises to help household budgets stretch further.”
The bill including the $800 million in checks and Whitmer’s proposed $79 billion budget for 2024 would have spent all but $250 million of the state’s $9 billion projected surplus.
Whitmer welcomed the bill’s passage, which she called “long overdue.”
“Michiganders need relief as inflation drives up costs and eats into their paychecks,” Whitmer said in a statement. “That’s why I worked with the Michigan Legislature to pass the Lowering MI Costs plan to deliver a $1 billion tax break for seniors and working families.”
Senate Republican Leader Aric Nesbitt, R-Porter Township, said Republicans protected a tax break for all Michiganders.
“Today, Senate Republicans protected the automatic income tax rollback that is due to millions of Michigan residents who need permanently lowered taxes, not a one-time gimmick that disappears in one trip to the grocery store,” Nesbitt said in a statement.
Nesbitt called on Democrats to work with Republicans to create a child tax credit, give tax relief to all seniors, and find other ways to fight inflation.
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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 “Gretchen Whitmer” by Gretchen Whitmer.