LANSING — The Michigan House passed a cut to the state income tax this week.
The proposal would reduce the state income tax from 4.25% to 4.05%, about a 5% reduction from current levels — but lawmakers are split on whether the plan would deliver relief for working Michiganders.
“Every Michigander is going to benefit from it,” said Rep. Parker Fairbairn, (R) District 107, Charlevoix. “They’re going to be able to spend that money at the grocery stores, or at the convenience stores, however they want. That’s the way it should be.”
The bill — HB 4170 — passed with support from all Republicans and seven Democrats.
Some Democrats say the proposal would help the rich more than the working class.
“If you feel that our system is broken, you’re right. Michigan’s tax system is broken, and it only benefits the extreme wealthy,” said Rep. Jasper Martus, (D) District 69, Flushing. “Because of our flat tax, a teacher, an auto worker and a billionaire all pay the same rate.”
Michigan’s income tax rate is flat, meaning that earners of all incomes pay the same percentage of their income to the state. This leads to much higher revenue being generated from high-earners.
According to the nonpartisan House Fiscal Agency, the cut would reduce state revenue by about $540 million this year, and by more than $700 million in future years. The state collects between $12-13 billion in income taxes every year.
“It doesn’t make a dent when it comes to the rising prices and helping people make ends meet,” said Rep. Morgan Foreman, (D) District 33, Pittsfield Twp. “This is bad economics that continues to play out at the government level. So while this bill is dressed up and triumphed as a win for hard-working families, it’s truly a loss for them.”
Republicans acknowledged that the government would be working with reduced revenue under the plan, but say that economic growth would outweigh those impacts.
“Some cuts are going to be made — I mean, that’s the point of it,” Fairbairn said. “Governor Whitmer said there’s going to be cuts in her State of the State address, so I think it’s important to realize that’s the reality of it at the end of the day.”
The proposal faces an uphill battle in the Democratic-controlled Senate — Majority Leader Winnie Brinks says she’s skeptical the cut would help lower cost-of-living expenses.
Republican House Speaker Matt Hall says he could use the plan as a negotiating chip in ongoing state budget discussions, which would need to be approved by both chambers.