Michigan Leaders Announce Plan for “Biggest Tax Relief to Michiganders in Decades

Michigan Gov. Gretchen Whitmer, Senate Majority Leader Winnie Brinks, and House Speaker Joe Tate on Friday announced a framework agreement that they say will provide the largest tax break to Michiganders in decades.^[0] The Lowering MI Costs plan will repeal the retirement tax to save 500,000 households an average of $1,000 a year, increase the Working Families Tax Credit to put an average of $3,150 back into the pockets of 700,000 Michiganders, and deliver inflation relief checks to all Michigan taxpayers.^[1]

The Legislature would need to approve the plan.^[2] Senate Minority Leader Aric Nesbitt, a Republican from Van Buren County, is “cautiously optimistic” about the proposal offering immediate inflation relief.^[3] The agreement would also expand the Earned Income Tax Credit that applies to families making less than $57,000 a year, averaging savings of about $2,467 in Michigan.^[4]

The proposal comes as Michigan is expecting a record $9 billion surplus.^[5] House and Senate Republicans in Michigan have advocated for a widespread tax reduction and the maintenance of the potential automatic decline in the personal income tax rate, which is the result of a 2015 statute.^[6] This policy connected the state's income tax rate, which is currently 4.25%, to the revenue for the general fund.^[6]

This week, Crain's Detroit reported, according to unnamed sources, that the Whitmer administration had proposed allocating $800 million of tax revenue to the state's economic incentive fund for the 2022 fiscal year, with an additional $500 million investment each year for the following three years.^[3] The plan would prevent the income tax rate reduction that would have been caused by the general fund revenue.^[7]

Though the specifics have not been released yet, Whitmer said Friday at an event in Detroit that “We are poised to deliver the biggest tax relief to Michiganders in decades, and it will impact and benefit every taxpayer across the state.”^[8]

Representative Lightner said that redirecting the money could preempt the tax cut.^[9] At the January Consensus Revenue Estimating Conference, if the projections hold, the income tax rate in the state would go down from 4.25% to 4.05%, according to the standards set in 2015 legislation. However, Lightner suggested that using the money elsewhere could prevent the tax decrease.^[9]

The governor and her legislative lieutenants would not confirm the amount of the rebate checks and when they would be distributed.

0. “Whitmer, top lawmakers announce deal on Michigan income tax cuts” WJRT, 3 Feb. 2023, https://www.abc12.com/news/state/whitmer-top-lawmakers-announce-deal-on-michigan-income-tax-cuts/article_499169b4-a400-11ed-b073-876385978f0e.html

1. “Michigan taxpayers could get inflation relief checks under Democrats' plan agreed to Friday” WWJ, 3 Feb. 2023, https://www.audacy.com/wwjnewsradio/news/local/michiganders-would-get-inflation-relief-checks-under-plan

2. “Whitmer, Democrats propose tax cut package | News/Talk/Sports 94.9 WSJM” News/Talk/Sports 94.9 WSJM, 3 Feb. 2023, https://www.wsjm.com/2023/02/03/whitmer-democrats-propose-tax-cut-package/

3. “Whitmer, legislative leaders announce agreement on Michigan tax cuts” MLive.com, 3 Feb. 2023, https://www.mlive.com/politics/2023/02/whitmer-legislative-leaders-announce-agreement-on-michigan-tax-cuts.html

4. “Business group to Michigan Legislature: Extend tax cuts to more seniors” Bridge Michigan, 1 Feb. 2023, https://www.bridgemi.com/michigan-government/business-group-michigan-legislature-extend-tax-cuts-more-seniors

5. “Democrats may seek to head off potential Michigan income tax cut” MLive.com, 31 Jan. 2023, https://www.mlive.com/politics/2023/01/democrats-may-seek-to-head-off-michigan-income-tax-cut.html

6. “Michigan Democrats reach deal on wide-ranging tax cut, featuring rebate checks” Detroit News, 3 Feb. 2023, https://www.detroitnews.com/story/news/local/michigan/2023/02/03/michigan-legislature-democrats-tax-cut-rebate-checks/69870044007/

7. “Tax rebates planned by Gretchen Whitmer, Democrats as part of relief package” Bridge Michigan, 1 Feb. 2023, https://www.bridgemi.com/michigan-government/tax-rebates-planned-gretchen-whitmer-democrats-part-relief-package

8. “Whitmer, Democrats Agree Upon Massive Tax Relief Plan” 9&10 News, 4 Feb. 2023, https://www.9and10news.com/2023/02/03/whitmer-democrats-agree-upon-massive-tax-relief-plan

9. “Former pension tax bill goes to conference committee; Republicans worry it will see major changes” WKAR, 2 Feb. 2023, https://www.wkar.org/wkar-news/2023-02-02/former-pension-tax-bill-goes-to-conference-committee-republicans-worry-it-will-see-major-changes