Michigan residents could see a slight income tax cut under a bill that advanced out of the state House Finance Committee Tuesday.
The bill would lower the tax rate from 4.25% to 4.05%. That’s what it was in 2023, when a law requiring an automatic tax cut when state revenue meets certain benchmarks was triggered.
“I can't think of a better use of our money than to giving it back to taxpayers,” bill sponsor Rep. Kathy Schmaltz (R-Jackson) said during Tuesday’s committee hearing.
Schmaltz’s bill would apply the new lower tax rate starting this year, despite the current budget being crafted with revenue from the existing tax rate in mind.
During the hearing, Representative Kelly Breen (D-Novi) asked how that spending would be made up for if the plan were to go through.
“This is money we've already allocated. I'm wondering, how do you propose we fix that?” Breen asked.
An analysis from the non-partisan House Fiscal Agency predicts the cut could cost around $539 million in revenue during the current fiscal year.
But Representative Sarah Lightner (R-Springport), a former House Appropriations Committee Minority Vice Chair, said state officials projected that the state could still afford everything.
“Fiscal agreed that we have almost a billion dollars extra in this fiscal year. And rather than squander it, we want to give back to the people money that we think they deserve to spend on their own and keep more of their own paycheck,” Lightner said.
Using the most recently available Census data for median household income, the cut could come out to around $140 per household if enacted.
Activist Nichole Keway Biber testified against the bill in committee. She said she worries about what could be defunded in future budgets if the cuts go through.
I often think of it in terms of taxes as our money, as a community, and the possibility of caring for the common good. I often think about water infrastructure needs. It's been pretty significant,” Keway Biber said.
Ultimately, the bill made it out of the House Finance Committee with all nine Republicans voting in favor, three Democrats voting against, and two more voting to pass.
Following the hearing, House Republican Speaker Matt Hall (R-Richland Twp) said he expected fast action.
“We're going to move on that very quickly because it's part of our budget, right?” Hall told reporters at a press conference.
If passed in the Republican-controlled Michigan House, the bill would still likely face an uphill battle in the Democratically-controlled state Senate.
When asked how he plans to negotiate with the Senate, Hall mentioned a list of policy proposals that had been floated from House Republicans and the governor’s office, including on road funding, education, and closing the state’s books on the previous fiscal year.
“My thing would be we're proposing serious policy, Governor Whitmer is proposing serious policy. The Senate Democrats should get with it and engage in these conversations,” Hall said.
Whitmer’s spokesperson did not respond to a text Tuesday afternoon asking for comment.
