The Michigan Senate has passed House Bill 4001, which includes a wide-ranging tax deal aimed at reducing taxes for lower-income workers and pensioners while providing additional business incentives. However, the bill does not include the proposed $180 rebate checks for all Michigan tax filers, which were unable to gain enough Republican support to pass.
The tax deal would phase out taxes on public and private pensions, expand the state’s earned income tax credit to 30% of the federal rate, and save around 700,000 families approximately $600 per year, while 500,000 seniors would save an average of $1,000 from the pension tax.
If corporate income tax receipts surpass $1.2 billion in any given year, the state would redirect up to $600 million into economic development measures, including $500 million for the Strategic Outreach and Attraction Reserve Fund, a business incentive program.
Republicans opposed the proposed $180 rebate checks because they would have stopped a likely drop in Michigan’s income tax rate, which is set to occur under a 2015 law tying the tax to state general fund revenue growth. The trigger law could reduce the tax rate from 4.25% to as low as 4.05%. Despite this, tax cuts had bipartisan support.
With the state government sitting on a roughly $9 billion surplus and inflation impacting pocketbooks, any income tax cuts would be made official once the final 2022 revenue numbers are confirmed, which is expected to be in March.
The $180 stimulus would have given immediate relief, but the income tax cut will provide long-term savings. The passing of House Bill 4001 is a significant step forward in reducing taxes and increasing incentives for businesses in Michigan, despite some lawmakers’ disappointment that rebate checks were not included.
A report by Lauren Gibbons of Bridge Michigan published on March 1, 2023, greatly contributed to this news report.