LANSING, MI — The Michigan Senate Finance Committee approved a $2.3 billion tax cut Republican supporters of the proposal said will benefit individuals and corporations.
The bill, SB 768, would lower the state’s personal and corporate income tax rates to 3.9% from 4.25% and 6%, respectively, and provide families with a $500 per child tax credit.
Calls for tax cuts come as Michigan is taking in billions more in state revenue than previously expected, adding to the historic amount of money currently at the government’s disposal, according to projections from the state’s top fiscal experts.
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Senate Finance Committee Chair Jim Runestad, R-White Lake, said keeping tax rates low is imperative for Michigan to be competitive.
“Now is the time to keep the promise as the people of Michigan have weathered economic and supply chain disasters that have followed the poor unilateral policy decisions, and historic levels of inflation — all while the state is exceeding revenue projections,” Runestead said in a statement Wednesday.
In 2007, Michigan’s income tax rate was increased from 3.9% to 4.35%. Runestead said lawmakers had abandoned a promise made to roll it back to 3.9% by 2015.
“Families and small businesses are being hit hard by inflation. Our historic tax relief will lower income taxes on hardworking families, provide a $500 per child tax credit, and reduce Michigan’s business tax rate to the lowest in the Midwest,” said Sen. Aric Nesbitt, R-Lawton, who serves as committee vice chair and is the sponsor of Senate Bill 768. “The cornerstone of a healthy economy is leaving more resources with families and small businesses, expanding freedom, and encouraging hard work and investment.”
Conservative tax policy expert Grover Norquist, president of Americans for Tax Reform, spoke in support of the legislation during the hearing Wednesday via Zoom, arguing that cuts to the corporate income tax rate drive wages up, while increases to corporate income taxes decrease wages.
“When you look at dropping the corporate rate, you are also looking at increasing the wages that citizens of Michigan or any other state will benefit from,” Norquist said. “Michigan taking its corporate and individual rates down is very important.”
Sen. Stephanie Chang, D-Detroit, pushed back against some of the suggestions made by her Republican colleagues and individuals who spoke in support of the proposal. She said she’s not sure whether lowering tax rates will actually result in increased wages.
“I appreciate the thought that corporations might choose to lower prices or might choose to hire people, but there is nothing guaranteed about any of that with this bill,” Chang said. “I’m concerned that wouldn’t cutting the corporate income tax actually increases inflation making it harder for our families to afford the things they need.”
Providing incentives to all businesses to create and retain their jobs sends a powerful signal, said James Hohman, director of fiscal policy at the Mackinac Center, a Midland-based nonprofit that advocates for free-market economic policies.
“Taxing businesses is a disincentive for them to expand here in Michigan and so decreasing tax burdens will further encourage job growth,” Hohman said.
Gov. Gretchen Whitmer is expected to announce her tax cut proposal -- which focuses on cuts that benefit individuals, including restoring the Earned Income Tax Credit and eliminating the so-called “pension tax” -- during her State of the State address Wednesday night at 7 p.m.
Runestead said he’s glad to see the administration also advocate for some tax cuts, adding that it’s imperative for Michigan to be competitive.
“It’s past time for the governor and legislative leaders to come together and provide real and meaningful relief to the hardworking taxpayers of this state. Families and businesses can spend their dollars far better and wiser than the government can,” he said.
The bill advanced from the committee in a 5-2 vote. Chang and Sen. Betty Jean Alexander, D-Dearborn Heights, were the two no votes. SB 768 now moves to the full Senate for consideration.
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