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Tax Plan Sent to Governor Minus $180 Rebates

March 7, 2023

Article courtesy MIRS News for SBAM’s Lansing Watchdog e-newsletter

A $1 billion tax cut for retirees and low-income workers was sent to the governor’s desk Wednesday, but without the Senate Republican support needed to give every tax filer a $180 rebate this spring or summer.

As part of a deal cut Tuesday night, HB 4001 was sent to Gov. Gretchen Whitmer without immediate effect on the presumption that there’s enough General Fund revenue leftover in the prior Fiscal Year 2022 budget to trigger a .2 percent income tax reduction.

The governor and Democrats were hoping to avoid the income tax rollback by retroactively shifting $800 million General Fund dollars into a new fund that would pay for the rebates. Privately, the D’s were concerned about future revenue cuts, but publicly they’re bothered that the rich get a much larger bang from an income tax cut than the working poor.

In order for the $180 rebate to happen, HB 4001 needed to be enacted by April 18, 2023. Instead, it will be enacted in early 2024.

Under the constitution, two-thirds of each chamber are needed to give legislation immediate effect or else a signed bill goes into effect 90 days after the end of the session. The House has traditionally used a procedural sleight of hand to get immediate effect.

The Senate, by rule, puts all of its votes on a voting board, so “IE” is nearly impossible to fudge. An effort to change the rules didn’t work out because the entire Senate Democratic caucus wasn’t united behind it.

The 2015 gas tax hike created an income tax rollback scheme based on how much money the General Fund collected by the close of the state’s accounting books in late March compared to 2021. Based on preliminary Fiscal Agency estimates, the trigger will be tripped for 2022 and the 4.25% income tax rate will roll back to 4.05%.

Whitmer avoided mentioning any of this in her email message to constituents. Instead, she highlighted how pension and other retirement income will be exempt from the state’s income tax once again, saving 500,000 households an average of $1,000 a year.

She also noted that expanding the Earned Income Tax Credit from 6% of the federal level to 30% will give around 700,000 Michiganders an income tax cut of $3,150 a year.

“Lowering MI Costs provides long overdue relief for Michiganders after the rug was ripped out from under them in 2011 when the retirement tax was slapped on and the Working Families Tax Credit was gutted,” she wrote. “We’ve worked together for over a decade to get this done, and I am proud to have partners in the legislature committed to delivering real relief.”

House Minority Leader Matt Hall (R-Kalamazoo) was quick to mention the projected income tax rollback, though, he said the governor “pulled out all the stops” to prevent it from happening.

“Republicans stood strong for taxpayers in our state,” Hall said. “The governor backed down, and her disastrous scheme failed.

“Now, every Michigan resident and small business will get a permanent income tax cut as they wrestle with the rising costs of living, now and in the years ahead.”

Senate Minority Leader Aric Nesbitt (R-Lawton) said he’s hopeful that Democrats will work with his side again to create a child tax credit and “explore other ways to reduce the pain caused by record-high prices.”

Republicans requested HB 4001 be sent to the governor without immediate effect as its opening salvo to begin discussions on giving the Democrats the six immediate effect votes needed to make happen the $800 million in incentives for the proposed Ford electric plant in Marshall.

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