By DAVID EGGERT, Associated Press
LANSING, Mich. (AP) — Republicans who control the Michigan Senate passed a $2.5 billion annual tax cut on Tuesday, voting to lower incomes and corporate rates while allowing people to claim a credit for their children and deduct more retirement income.
The step came less than a week after Democratic Governor Gretchen Whitmer officially proposed less extensive tax breaks for retirees and low earners. It would cost $757 million once implemented, less than a third of the GOP’s proposal.
Citing a multibillion-dollar budget surplus, Republicans said it was time to return money to those affected by the pandemic and high inflation, and to keep the state’s business climate competitive.
“Inflation is a pay cut for every Michigander,” said the bill’s sponsor, Republican Sen. Aric Nesbitt of Lawton. “The state government may be full of money, but it’s not our money. … It’s the people’s money. And right now, they need to send less of it to Lansing so they can have more to fill their cars, heat their homes, and feed their families.
Democrats who opposed the measure criticized the GOP majority for not specifying how to pay for a planned 16% reduction in the general fund and a smaller drop in the school aid account. The legislation, they said, would disproportionately help businesses.
“We should be giving people, individuals, the greatest tax relief in all of these proposals,” said Sen. Stephanie Chang, a Democrat from Detroit who echoed the governor’s call to restore the tax credit on earned income at 20% federal credit. It was cut to 6% a decade ago under a Republican-drafted law that cut taxes on businesses and eliminated tax exemptions for pensions.
“This bill is too focused on companies that are making profits – and some of them are making a profit – when as public servants we should stay focused on putting Michigan’s hardworking families first” , she said.
The legislation would reduce the personal income tax rate from 4.25% to 3.9% and the corporate income tax rate from 6% to 3.9%. It would create a tax credit of $500 per child. A $600 deduction was eliminated as part of the decade-old tax overhaul.
People aged 67 and over could deduct more of their income from tax.
The legislation, approved 22-16 along party lines, has been sent to the GOP-led House for next consideration. Tax cuts will be negotiated during the months-long budget process that began last week.
The nonpartisan Senate Tax Agency estimates that the personal income tax cut would cost $1 billion in the next fiscal year, the child tax credit $750 million to $800 million, the corporate cut of $465 million and the higher deduction for seniors of at least $170 million.
Whitmer spokeswoman Bobby Leddy did not give her position on the bill and instead reiterated that “setting things straight” includes lowering taxes for working families and eliminating the taxation of retirement income.
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