Michigan Senate committee approves sweeping $2.3 billion tax cut

Lansing — A Michigan Senate committee advanced Wednesday a $2.3 billion tax cut proposal with majority Republicans contending the state's financial surpluses should be used to provide "across the board" relief.

The Senate Finance Committee voted 5-2, along party lines, in favor of the bill that would cut the personal income tax rate and the corporate income tax rate and create a new $500 per-child tax credit.

The legislation would have to pass the full Senate, where now it goes, pass the full House and gain Democratic Gov Gretchen Whitmer's signature to become law. Whitmer is expected to call for more targeted tax cuts, aimed at seniors and low-income residents, during her State of the State address at 7 p.m. Wednesday night.

Sen. Aric Nesbitt, R-Lawton, the sponsor of the tax cut proposal, tied it Wednesday to rising prices and the state's budget surpluses, which he said were more than $4 billion in the General Fund and the School Aid Fund.

“We need to step up and help hardworking taxpayers, small business owners and our seniors and our working families,” Nesbitt said.

If enacted, the bill would cost the state about $2.3 billion in revenue in Fiscal Year 2023, according to an analysis by the nonpartisan Senate Fiscal Agency. The price tag would increase as the state's economy grows, the agency said.

The bill would lower Michigan's corporate income tax rate from 6% to 3.9%, cutting tax revenue by about $465 million in Fiscal Year 2023, according to the Senate Fiscal Agency. It would decrease the personal income tax rate from 4.25% to 3.9%, trimming revenue by $1.1 billion in Fiscal Year 2023.

It would also allow people to claim a $500 non-refundable credit for each dependent under the age of 19 with an impact of about $750 million to $800 million per year, according to the Senate Fiscal Agency.

The state's overall budget was about $70 billion when Whitmer signed it in September.

Sen. Stephanie Chang, D-Detroit, said she was concerned about the "ongoing hit" to the state's finances the bill would cause.

“We can’t predict what our economy is going to look like in four or five years," Chang said.

She asked Nesbitt if the proposal would provide more relief to large corporations or families. The Republican lawmaker said families would primarily benefit. It's important, he said, tax relief go to as many people as possible and create a more competitive environment in Michigan.

The arguments could set the political battle lines with Whitmer, who is up for reelection in November, over how to handle the state's budget surpluses.

"Gov. Whitmer will announce a plan in her State of the State address to keep her foot on the gas to make our state a place that puts more money in people’s pockets and gets more Michiganders back to work, so that we can continue our strong economic progress," Whitmer spokesman Bobby Leddy said last week.

Conservative Grover Norquist, president of the national group Americans for Tax Reform, spoke in favor of the Republican proposal during Wednesday's committee hearing .

Appearing virtually, he detailed how other states have cut their income tax rates, which he suggested put pressure on Michigan to act.

"Those states that have worse tax structures than Michigan are looking to get better and get ahead of you, and those that are even with you now are moving forward toward zero," Norquist said. "It’s not a static world."

In a statement Wednesday, Senate Finance Chairman Jim Runestad, R-White Lake, said it was "past time for the governor and legislative leaders to come together and provide real and meaningful relief to the hardworking taxpayers of this state."

cmauger@detroitnews.com

Staff Writer Beth LeBlanc contributed.