fbpx
Published in Economic Development
State Senate passes plan to reduce corporate, individual income tax rates COURTESY PHOTO

State Senate passes plan to reduce corporate, individual income tax rates

BY Tuesday, February 15, 2022 03:30pm

LANSING — The state Senate has advanced legislation to reduce the personal and corporate income taxes in Michigan, a proposal that contrasts Gov. Gretchen Whitmer’s pitch for targeted election-year tax cuts.

The Senate voted 22-16 along party lines today to pass Senate Bill 768, which would provide about $2.5 billion in tax relief by cutting the state corporate income tax from 6 percent to 3.9 percent, and the individual income tax rate from 4.25 percent to 3.9 percent.

The legislation that passed the Senate also would allow individuals 67 and older to take a $30,000 deduction on their annual state tax returns on all types of income, or $60,000 for a joint return, with the amount adjusted annually for inflation beginning in 2023. That would increase the amount of income seniors could deduct by $10,000 per tax return for individual filers, and $20,000 for joint returns, according to a Senate Fiscal Agency analysis on the bill.

The Michigan office of the National Federation of Independent Businesses (NFIB) called the bill “a win for all small businesses in Michigan who have been struggling over the past two years.”

“NFIB can’t think of a better way to use ongoing budget surpluses than to return it to the hardworking taxpayers who provided it in the first place,” Amanda Fisher, director of the NFIB’s Michigan office, said in a statement.

If enacted, the bill would elevate Michigan to a top-10 state for competitive tax climates, which is “a plus when trying to attract new business to Michigan,” Fisher said.

“We are calling on the governor to continue the partnership and compromise with the legislature that marked the last weeks of December 2021 and support tax policy that does not pick winners and losers,” she said. “NFIB stands ready to work with Michigan’s elected officials to use this unique budget opportunity to help our small businesses not only recover from the past two years, but to thrive.”

However, the Michigan League for Public Policy said the Legislature’s plan to reduce the state income tax rate would primarily benefit higher wage earners while also jeopardizing federal American Rescue Plan Act funding.

“Everyone in Michigan wants a strong recovery from the pandemic that includes better jobs and wages, healthier communities, and a thriving future. However, broad-based tax changes, like the cuts to the personal and corporate income taxes, will primarily benefit wealthy individuals and corporations, do little to help spur our economy and have a devastating impact on our ability to provide the services that our businesses and residents value,” MLPP President and CEO Monique Stanton said in a statement. “Moreover, with this proposal, the state risks losing vital federal aid under the American Rescue Plan Act, federal dollars that are supposed to be used to help Michigan’s workers, families, businesses and communities recover from the COVID-19 pandemic and its economic impacts.”

S.B. 768 now goes to the state House for consideration.

Whitmer has pitched her own tax-cut proposals. Her budget proposal for the state’s 2023 fiscal year that begins Oct. 1 would increase the state’s earned income tax credit from 6 percent to 20 percent of the federal credit, providing nearly $3,000 in tax relief to an estimated 750,000 households.

The governor also wants to repeal the state’s “retirement tax” on public pensions over four years and restore deductions on private retirement income such as IRAs and 401(k)s, generating more than $1,000 in annual tax savings for 500,000 households.

The tax cut proposals come after the state recorded a $2.69 billion budget surplus for the 2021 fiscal year that ended Sept. 30, and as estimates project a $1.44 billion surplus in the present 2022 fiscal year. The state has billions more in one-time money from federal pandemic relief and infrastructure funding.

Read 1885 times Last modified on Tuesday, 15 February 2022 15:33
SUBSCRIBE TO MIBIZ TODAY FOR WEST MICHIGAN’S FINEST BUSINESS NEWS REPORTING >