Whitmer’s office said it was “still going for tax cuts for the elderly and working families,” but signaled a possible veto on the Republican Party’s plan. She called it “volatile,” given nonpartisan projections that could force more than $ 1.8 billion cut annually, despite one-time federal stimulus.


Republicans say the state budget is big enough to cut taxes. One-time incentives have helped increase Michigan’s state budget from $ 58 billion in 2019 to $ 63 billion in 2021.

“Every Michigan needs help at this time of record high inflation, supply chain shortages and communities trying to recover after the shutdown,” said Sen. Arik Nesbitt, sponsor of R-Lawton. “No Michigan is safe from the state of our economy, and no Michigan should be left out when it comes to substantial tax relief.”

The Republican Party’s plan, mediated by House and Senate leaders, cut the Michigan income tax rate from 4.25 percent to 3.9 percent. It would lower taxes for millions of Michigan residents – all but those who don’t earn enough to pay taxes – but the high-paying people who pay the most taxes will save the most money.

For example, a family of four with an income of $ 63,829 – the median for Michigan in 2020 – would save $ 153 next year. A family of four with a salary of $ 200,000, which would be 5 percent of the best salary, would save $ 630.

The Republican Party plan, approved by the Senate in a 22-15 party vote, will also create a $ 500 tax credit for families. And that would double the income tax exemption from $ 20,000 to $ 40,000 for an individual, while lowering the qualifying age from 67 to 62 years.

Under an agreement with the House of Representatives, Republicans in the Senate have agreed to waive a $ 490 million corporate tax cut from a package now headed to Whitmer. But the upper house approved separate independent legislation on Thursday it would lower the corporate rate from 6 percent to 3.9 percent, sending the proposal back to the House of Representatives for further consideration.

In Michigan, there are approximately $ 7 billion in federal incentive funds and another $ 7 billion in surplus, but federal regulations typically prohibit states from using incentive money to pay tax cuts.

To comply with federal law, the Senate’s nonpartisan fiscal agency estimates that Michigan will need to generate new revenue or cut spending by $ 4.1 billion over the next three fiscal years to pay for Republican tax cuts.

That could force the state to cut funding for schools, roads or police protection, Whitmer spokesman Bobby Lady warned this week.

“We are pleased that the legislature agrees in principle that the return of money in the pockets of retirees and working families in Michigan is a priority,” he said in a statement. “Now it’s time to sit down to agree on a bipartisan deal.”

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