Governor Gretchen Whitmer and the Michigan Legislature’s Democratic leaders rolled out a tax relief plan Monday that includes expanding the earned income tax credit and cutting taxes for pensioners. Democrats also want to send out $180 rebate checks as part of the deal.
Senate Majority Leader Winnie Brinks (D-Grand Rapids) said the checks would help residents deal with inflation. “We know prices are up and everybody is feeling the squeeze. Those extra cents per item at the grocery store add up and it affects all Michiganders regardless of income. We are in a position to help offset some of those costs with this smart one-time investment that will help people,” Brinks said at a press conference Monday morning.
Republicans in the minority said the Democrats’ plan doesn’t go far enough.
“Frankly, when the state is sitting on a $9 billion surplus, we should be doing more than handing out a one-time annual rebate check that equals 49 cents per day,” Senate Minority Leader Aric Nesbitt (R-Porter Twp) said in a statement.
The plan has been in the works for weeks. There aren’t many surprises, but it does show some early indications of the new Democratic majorities’ priorities as the governor and the Legislature head into budget season.
Whitmer predicted the one-time checks to everyone who files a tax return could be in the mail as early as this coming spring. Her staff estimates that would add up to roughly $800 million being sent back to taxpayers.
The Democrats’ package would also include rolling back the state’s tax on pensions and most other retirement income, and a big boost to the state earned income tax credit for lower- and moderate-income households.
“One of the things I find so compelling about this particular policy is this benefits a million children in Michigan. This is half the kids in our state. Helps parents pay the bills, put food on the table and buy winter clothes. And the good news is our plan makes it retroactive for 2022 so you’ll get more money back this year,” Whitmer said Monday.
Republicans reduced the credit in 2011 to help pay for cuts in business taxes.
The state currently allows Michigan filers to claim 6% of the federal earned income credit. Brinks said the Democrats’ plan would increase that number to 30% and retroactively apply it to the 2022 tax year.
“These people counted on the earned income tax credit as part of their household budget. These are folks who are doing the best they can just to get by. They work hard and they deserve a little room to breathe,” Brinks said.
Much of the package would be funded by a projected $9 billion budget surplus. That’s due an improving revenue picture largely because of unspent federal COVID relief funds. Despite the surplus, Democrats have been reluctant to incorporate tax cuts into state law that could lead to future cuts in state services in the event of a downturn.
Yet, if revenue estimates hold, Michigan could be in line for an income tax cut from its current rate of 4.25% to 4.05% due to a 2015 law.
Jeff Wiggins is the spokesman for Nesbitt. He said Republicans are on the lookout to see if the plan detailed Monday would spend down the surplus to circumvent that automatic rollback.
“And so there’s a lot going on here still that hasn’t been explained, we’ve been provided no details on any of those implications and so very, very much concerning that we don’t have answers to these very important questions,” Wiggins said.
Specific bill language for the Democratic proposal isn’t publicly available yet.
During the press conference, the governor’s staff didn’t have details ready to say whether the rebate checks would come out of the Fiscal Year 2022 general fund budget, thus jeopardizing the possible cut.
Democrats have very slim majorities in the House and the Senate and will very likely need Republican votes. It will take bipartisan super-majorities on critical procedural votes for these new tax policies to take effect in time for this year's filings.
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