Here’s what’s in the dueling tax cut plans from Whitmer and Republicans

A Michigan Senate committee is expected to vote on one tax cut proposal Wednesday afternoon, just hours before Gov. Gretchen Whitmer calls for separate tax cuts in her State of the State address this evening.

That comes after state fiscal experts earlier this month reported “astounding” revenue growth as Michigan recovers economically from the COVID-19 pandemic.

The GOP-led Senate Finance Committee has a hearing at 12:30 p.m. Wednesday on legislation that would provide about $2.3 billion of tax cuts by slashing the corporate income tax rate from 6% to 3.9%, the individual income tax rate from 4.25% to 3.9%, and would provide a $500 per-child tax credit.

Whitmer is expected to call for gradually ending the state’s pension tax and restoring the state’s Earned Income Tax Credit (EITC) to 20% of the federal credit after former Gov. Rick Snyder signed a law lowering the credit to 6% to help pay for his 2011 business tax cut.

“So the most equitable way that we can give people in Michigan tax relief is undoing the burden that was placed on our retirees and on our working poor back in 2011. It’s something that I opposed then, I still think that it is unfair in the most literal sense of the word,” Whitmer told the Advance in a Tuesday interview.

Whitmer had previously called for similar actions in her first budget, though at the time she also called for replacement revenue that is not expected to be part of her new plan as the state experiences a budget surplus.

The Michigan League for Public Policy (MLPP) has long supported increasing the EITC, which helps lower-income families. 

“The Michigan EITC has been a longstanding priority for the League. We supported the state EITC’s creation in 2006, we worked to save the state credit in 2011, and we have been fighting ever since to restore and expand the Michigan EITC from the drastic cut in 2011,” said Monique Stanton, MLPP president and CEO. “The Michigan EITC is a win-win investment that resonates in all counties and political districts, benefits rural and urban residents, and supports families while getting spent at our small businesses and in our local communities.”

Senate Bill 768, sponsored by Sen. Aric Nesbitt (R-Lawton), which is being considered by the Senate committee Wednesday, would have to pass the full Senate, House of Representatives, and be signed by Whitmer before taking effect. The bill only has GOP sponsors.

In December, Whitmer signed bipartisan legislation for $1.5 billion in new business incentives. On Tuesday, General Motors announced it will be making an investment up to $7 billion in electric vehicle manufacturing in Michigan.

When the Advance asked Whitmer Tuesday if she would sign an income tax or corporate income tax cut, she said, “Well, when Republicans shifted taxes under retirees and the working poor, it had a massive impact on people who are playing by the rules, showing up every day and doing the right thing. “And so that is the best way to give people tax relief that increases the quality of life for people in our state, and ability to participate in our economy. So those are going to be the driving assessment I’ll make on any proposal.”

Michigan House Appropriations Committee Chair Thomas Albert (R-Lowell) said in a statement last week that he was open to working with others to find consensus on what type of tax relief should be considered.

“Michigan taxpayers fund state government through their hard work and sacrifice,” Albert said. “Runaway inflation brings more tax revenue to state government at the expense of hard-working taxpayers, hurting their family budgets. With state tax revenue projections well ahead of previous expectations, it is time we talk about tax relief rather than increasing ongoing government spending. I am hopeful the Legislature and governor can work together and figure out a way for Michiganders to keep some of that money – some form of tax relief will be a House priority in upcoming budget plans.”

Albert also said that separate negotiations over how to spend billions of dollars in federal revenue are ongoing.

Previously, Albert has noted that those funds will not be a recurring portion of the state’s revenue going forward.

“Revenue projections continue to exceed previous expectations, but it does not eliminate the need to be cautious and smart about how the state invests taxpayer money,” Albert said. “Our approach moving forward is simple. We will take advantage of existing one-time resources already available to make targeted investments that will benefit our state for years to come. But we will not create ongoing costs that could be difficult to sustain within Michigan’s year-to-year state budget.”

Christopher Harkins, Whitmer’s budget director, shared a similar sentiment with reporters following the January Consensus Revenue Estimating Conference, saying that the state should focus on “one-time investments that keep our budget in balance for the long term.”