Michigan Legislature Prepares for Battle over Tax Cuts

Surplus tax revenue leaves room in the budget

Unexpected state tax revenues have resulted in a combined $5.8 billion surplus in Michigan’s main two bank accounts. These funds, in the state General Fund and School Aid Fund, give Michigan’s legislature a change to refund that money to citizens in the form of tax cuts.

Those funds give Michigan’s legislature a change to refund that money to citizens in the form of tax cuts. Two are tax cuts for families – an income tax cut and a child tax credit. They’re also trying to help small businesses damages by Gov. Whitmer’s COVID shutdowns with a cut to corporate income tax. The third is a cut to pension taxes, for which Whitmer signaled her support in her State of the State address.

Robert Leddy, a Whitmer spokesperson, said that “Due to smart fiscal management and federal funding, the state has billions of surplus dollars that can be used to provide financial relief to repeal this unfair tax on retirements and provide relief for Michiganders,” Leddy said.

Sen. Aric Nesbitt, R – Lawton, proposed the income tax cut and child tax credit in December of 2021. He said that Whitmer’s reforms don’t go far enough. “The governor spoke about the issue of taxes, but we’ll see if that includes relief for all the families and business in Michigan. Struggling families and small businesses are being hit hard by inflation while the state budget is bringing in more revenue than estimates project,” he said in a statement. The bill would lower the state’s personal income tax rate from 4.25% to 3.9% and corporate income tax rates from 6% to 3.9%. It would also provide families with a $500 tax credit for every child.

Meanwhile, Sen. Tom Barrett, R ­– Charlotte, praised Whitmer for supporting his proposed cut to pension taxes. “This legislation can make an enormous difference for our seniors,” he said in a statement. “It is unfair to those on a fixed income to bear this additional burden of taxation on previously earned benefits. I appreciate Gov. Whitmer’s bipartisan support as she joins my effort to provide Michigan seniors with this overdue tax relief.”

Last spring, Whitmer and the GOP pledged to work together in determining how to spend the stimulus funding. This will be the test to see if Gov. Whitmer will commit to broad-based tax savings for everyone.