Michigan’s income tax rate could drop from 4.25% to 4.05% under a bill passed in the Michigan House Tuesday.
It would bring the rate back to what it was in 2023, when strong revenue triggered a law that temporarily lowered taxes. Michigan courts ruled that cut was only temporary, despite plaintiffs in a lawsuit claiming it was meant to be permanent.
On top of lowering the rate, the bill would make future cuts triggered under the law would carry forward to future years.
Bill sponsor Representative Kathy Schmaltz (R-Jackson) said the 2023 cut should have been permanent after all.
“Taxes jumped back up last year, so everybody got a tax increase. My bill would make things right,” Schmaltz said during a floor speech.
Using median household income data from the U.S. Census Bureau as a reference, that could come out to around $130 per household. Some would get far more and others would get far less.
Representative Jasper Martus (D-Flushing) voted against the bill. He said it wouldn’t make a difference for most residents.
“We saw the reduction from 4.25 to 4.05 in a previous fiscal year. The vast majority of my constituents never noticed it,” Martus said.
Under the plan, the lower income tax rate would kick in this year. The non-partisan House Fiscal Agency estimates that 0.2 percentage point change in the income tax rate could cost the state around $2 billion in revenue across the current and next couple of fiscal years under the plan.
Representative Morgan Foreman (D-Pittsfield Twp) said the bill could lead to residents losing services without seeing much of a benefit. Both Jasper and Foreman said they’d rather see a constitutional amendment that would allow Michigan to tax lower earners at lower rates, known as a graduated income tax, rather than this across the board cut.
“We want to do our fair share. We want to pay into our taxes so we can have the things we want. We want the better roads. We want the remarkable schools. We want to pay for the great higher education that we have in this state. But we can't do that if we're playing along with these joking tax bills,” Foreman said told reporters.
Despite the criticism, Schmaltz and other Republicans maintained the tax cut would benefit everyone. She has noted the state budget has grown billions of dollars in recent years in making the case that the state should give some of that money back.
“The passage of this bill will put hundreds of millions of dollars back into the pockets of over 5 million taxpayers. That means everyone has more money they can use for groceries, gas, school supplies, or saving for the future,” she said.
The bill now goes to the Democratically controlled state Senate, where it’s less likely to see a vote.
