State Democrats delay vote on priority tax plan
A planned vote by Michigan House Democratic leadership failed to materialize Wednesday as the majority party appeared to still be gathering enough support on a high-priority tax bill to push it on to the state Senate.
The bill would phase out taxes on pension income and expand the state’s Earned Income Tax Credit (EITC) to 30% of the federal rate.
Many of its details weren’t available until shortly before the House convened Wednesday. It had been on the agenda for consideration, and—for the second time this session—a COVID-19-positive Democratic representative appeared in the gallery in case her vote was needed. But the House adjourned that evening without voting on it.
House Speaker Joe Tate (D-Detroit) said he wanted to give lawmakers more time to look over the bill.
“I think that’s something that not only my caucus members in the House wanted to see but also on the other side of the aisle too, so we’re getting them that opportunity,” Tate told reporters after deciding to call it a night. He said he’s confident it will pass Thursday.
Some sticking points in the bill revolve around how it would handle proposed rebate checks for Michigan taxpayers.
The legislation would send out either $90 or $180 checks, depending on a person’s marriage and tax filing status.
Money for the checks would come out of the newly created “Michigan Taxpayer Rebate Fund.” The bill would deposit $800 million from Fiscal Year 2022 corporate income tax revenue directly into that account, rather than the general fund.
Republicans worry that would put a projected income tax reduction stemming from high state revenue at risk.
Speaking to reporters, House Minority Leader Matt Hall (R-Richland Twp.) derided the plan.
“That is a bad trade: trading a one-time $180 check for permanent tax relief for all of our small businesses, workers and families," Hall said.
Democrats argued their plan is more equitable and provides quicker help to families than Republican proposals.
Still, Hall pledged any legislation that would threaten to cancel out the projected tax could wouldn’t get any support from his side of the aisle.
“If [Democratic leadership] just had a straight vote on this — on this retirement tax, we would support it. If they just had a straight vote on the EITC, we would support it. And we’ve demonstrated that. When it was on the board, it was overwhelmingly supported,” Hall said.
Many of the proposals outlined in the bill match what Democratic legislative leadership had previously discussed during a press conference Monday alongside the governor. Specifics unveiled Wednesday show a few new changes.
Unlike earlier proposals, Wednesday’s bill would treat private and public pension income similarly. It would carve out an exception to the phase-out for police and firefighters so their pensions would become tax free starting this current tax year.
One new change not previously outlined publicly would change how corporate income tax revenue gets handled in future years as well.
Under the proposal, when corporate income tax revenue passes $1.2 billion in a fiscal year, that extra money could go toward housing, renewal projects, and the Strategic Outreach and Attraction Reserve (SOAR) Fund. That’s an account used to provide economic incentives across the current and next fiscal year. The SOAR Fund would receive the vast majority of that money.
“This is the first time in Michigan history we’re going to have a dedicated pot to go to for affordable housing, community development. And we all know what SOAR has done. I think jobs matter at the end of the day, and we need to have that in the State of Michigan because we’re competing with other states,” Tate said.
It might, however, serve as another point of contention preventing holdouts from signing on.
Democrats will need Republican buy-in to make sure the bill takes effect in time to send out the tax rebate checks. Without that GOP support in the Senate on what’s known as an "immediate effect" vote, the earned income tax credit expansion would also have to wait until next year for residents to see it on their taxes.