The plan will also allow seniors aged 62 and over to deduct up to $ 40,000 annually from income tax or $ 80,000 for co-tax.
Proponents of the plan, such as House Hall Tax Policy Chairman Matt Hall, R. Marshall, and House Appropriations Committee Chairman Thomas Albert R. Lowell, said the plan prioritizes working families in Michigan.
“According to this plan, everyone will win. All the workers, all the elderly, all the families, ”Hall told reporters Thursday after he presented the proposal at a joint hearing between the House Appropriations and Tax Policy committees.
Critics, however, argue that the plan will target more affluent Michigan residents than low- and middle-income workers. Alex Rosman, a spokesman for the Michigan State Policy League, which opposes the proposal, said in press release on Thursday.
Under the House of Representatives plan, an individual earning $ 20,000 a year would save $ 52.85 in state taxes, while a person earning $ 400,000 a year would save $ 1,382.85.
“Republican lawmakers are pushing for broad, comprehensive tax cuts that primarily benefit the wealthiest residents and businesses, while significantly reducing our current and future budgets in the process,” said Monique Stanton, president and CEO of the Michigan League. public policy, the statement said.
The plan of the House of Representatives of the National Assembly is the latest of several competing proposals, as negotiations on tax cuts have attacked Lansing. Republicans in the Michigan Senate have devised a plan offer tax breaks for corporations, individual workers and the elderly. Democratic Gov. Whitmer, who is criticized the Senate plan as “unsustainable” promised to abolish the state “pension tax” – a tiered system that taxes at retirement depending on the time of birth of the taxpayer – and increase the income tax credit for low-income workers.
The state’s final budget is likely to change from proposals made so far by the House of Representatives, Senate and governor’s office if Republican leaders in the legislature and the governor-Democrats agree on an agreement.
“Governor Whitmer has always said he will work with anyone who wants to work together to solve problems and bring them to an end,” Whitmer spokesman Bobby Lady said in an email.
The plans come at a time when the state is trying to spend $ 7 billion in surplus revenue and another $ 7 billion in federal incentives. However, incentive money cannot be used to fund tax cuts under federal regulations.
The House of Representatives tax cuts are estimated to result in revenue losses of $ 2.4 billion in fiscal year 2023 and $ 1.7 billion next year. analysis of the fiscal agency of the House of Representatives. In context, in fiscal year 2020, the state collected $ 31.4 billion in taxes and fees, including $ 10 billion in income tax. full financial report of the state.
Albert and Hall said they may consider cutting the budget to cover the revenue gap, but are confident their plan is sustainable.
“Where there is freedom, there is a way,” Albert told reporters. “We have so many options on the table. … We are not working at 100 percent efficiency, so yes, there are areas in the budget that we can comfortably (cut).
“There are a lot of options on the table,” Albert said. “No one will believe we can’t find the money.”
However, neither Albert nor Hall have named areas of the state budget that they believe could be cut.
Opponents say the price tag of the House of Representatives bill is too high.
“These costs will require the state to either cut the utilities we all count on, or risk losing important federal aid provided under the U.S. Rescue Plan Act, in dollars designed to help workers, families and businesses. struggling to recover from the economic consequences of the pandemic, ”Rasman said in a statement on behalf of the Michigan League of Public Policy.
By comparison, the Senate plan will cost about $ 2 billion a year. Whitmer’s plan to phase out the pension tax will cost the state $ 13 million this fiscal year and $ 495 million a year until fiscal 2025. An increase in the income tax credit will lead to a drop in revenue of $ 262 million each year.
Hall said he presented his own plan because other proposals benefit certain groups of people, not all Michigan.
“We’ve seen corporate benefits, we’ve seen the benefits of certain people. Choose a few, but not all, ”he told reporters.
The Republican plan in the House of Representatives includes the same reduction in personal income tax proposed by Republicans in the Senate – a reduction in the rate from 4.25 percent to 3.9 percent.
Hall, which is sponsoring the law, called the state’s economic situation on Thursday a reason to return the tax rate to 3.9 percent – before former Democratic Gov. Jennifer Grenholm raised it to 4.35 percent in 2007 to close the $ 2 billion deficit. Granholm promised to return the rate to 3.9 percent within a few years, but her successor, Republican Rick Snyder, froze the rate at today’s 4.25 percent.
“Now we’re sitting on more money than ever,” Hall said Thursday. “If we can’t bring it back to 3.9 now and give people tax breaks, they’ll never do it.”
Hall’s proposal also provides for a reduction in income tax for seniors aged 62 and over, extending and increasing the exemption, which is currently limited to individuals 67 and older. A senior working in Michigan will be able to deduct $ 20,000 from his taxable income, and a retiree will be allowed to deduct $ 40,000. These figures are doubled when senior citizens apply together, which means that a couple of retirees aged 62 and over who earn $ 80,000 a year will be charged all that income without tax.
James Homann, director of fiscal policy at the McKinney Center, described the House of Representatives’ tax reduction plan as a way to “make Michigan more competitive, encourage small business and … help the state attract more people.”
Democratic lawmakers expressed concern Thursday that the plan would unfairly benefit wealthy taxpayers. Tennis MP Yancey, D-Harper Woods, tried unsuccessfully to bring Whitmer’s proposals to the joint committee on Thursday.
“How much do you think 1 percent is actually having difficulty?” Yancey asked Hall during Thursday’s hearing, citing a Michigan League of Public Policy study. “Is it fair?”
Hall insisted that his plan helps all Michigan.
“People want relief, all people,” he said. “There are no tricks here.”
Although the plan costs the state about $ 2 billion a year, Hall and Albert said they were not concerned about the long-term fiscal impacts of their proposal and said it would be fully funded by the state’s own revenues.
Albert said he was ready to cut government spending on tax cuts, but did not specify in which areas he sees outdated funding.