The Michigan House of Representatives passed legislation Tuesday to lower the state’s income tax rate to 3.9% from 4.25%.
The bill combines state House and Senate proposals to create a $500 child tax credit and expand exemptions for people over the age of 62.
Rep. Rodney Wakeman (R-Saginaw Twp) said the cut’s multi-billion-dollar budget impact is worth it to give a break to families.
“I do believe that the state does need to understand what their take is and what their expenditures are, just like what we all do at home. At this point in time, it’s very important that the people at home understand that we’ve got their backs,” Wakeman said.
Meanwhile, opponents said the tax cut would benefit the state’s top earners significantly more than average families.
“This bill, which gives an across-the-board tax cut, would put far more money into the pockets of the top 1% of Michiganders rather than the working families who really need it,” Rep. Rachel Hood (D-Grand Rapids).
Another point of concern with the tax cuts dealt with their cost to the state.
House Fiscal Agency analysis estimates it would cost the state about $6.5 billion through fiscal year 2024.
Critics raised concerns about how the cuts would affect federal money the state received through the American Rescue Plan Act.
Rep. Helena Scott (D-Detroit) said the cuts would break that law’s ban on using the federal money to pay for tax cuts.
“The federal government, they’ll take it back and we’ll be left to fend for ourselves,” Scott said.
House Tax Policy Committee Chair Rep. Matt Hall (R-Marshall) said he’s working with the House Appropriations Committee to pay for it.
“The fact is either you support real tax relief during times of inflation for all Michigan families, seniors, or workers, or you don’t,” Hall said from the House floor.
But some Democratic lawmakers still aren’t sold.
“The only way you can get around this is to make substantial cuts right now. Take away all the School Aid Fund increases that are there. The only way you avoid a federal claw back is to cut the budget by $3 billion to $6 billion,” House Minority Leader Donna Lasinski (D-Scio Twp) said.
The bill eventually passed the House by a 62-42-2 vote, with some Democrats crossing party lines at the last minute. It now returns to the Senate.
The House also voted to approve a $1.5 billion spending bill to supplement the current fiscal year’s budget.
HB 5054 would create grants to help local governments shore up their pension systems.
House Appropriations Committee Chair Thomas Albert (R-Lowell) said the bill would help stabilize retirement systems for the future.
“This is a positive and proactive solution that helps secure people’s retirements, prevent taxpayers having to bail out municipalities and make sure our children and grandchildren aren’t footing the bill for failed systems in future years,” Albert said.
Democrats took issue with conditions placed on local governments to receive the money, calling them “poison pills.” Those rules include a ten-year ban on changing pension benefits.
That bill passed the House on a 71-33-2 vote.