Michigan House approves bill to move up income tax cut to October

Posted on June 8, 2012

Michigan taxpayers could get enough back from the state to pay for a fast-food lunch — or two, if they’re thrifty — under a measure approved Wednesday by the Michigan House that aims to accelerate a pending income tax cut.

If approved by the Senate and signed by Gov. Rick Snyder, the tax cut would amount to an average of $10 a person during the fiscal year starting Oct. 1 and reduce state revenue by about $103 million, the House Fiscal Agency said.

The proposal would move up by three months the planned drop in an individual’s tax rate to 4.25 percent from 4.35 percent. That was originally supposed to happen last October before Gov. Rick Snyder and Republican lawmakers decided to delay it by a year.

The measure passed with another that would increase how much someone can earn before taxes kick in. The personal exemption would climb from $3,700 per person to $3,950 on Oct. 1, then increase $50 on Jan. 1, 2014, and $100 on Jan. 1, 2017.

Under policies pushed by Snyder and GOP lawmakers last year, individual taxpayers will pay over $500 million more to the state this year and $1.4 billion more to the state next year because of lost deductions and credits for property tax payments, charitable contributions, children, college expenses and other items. Most retirement income also now is covered by the state income tax, although public pensions used to be exempt.

The legislation generated heated exchanges between Republicans, who view it as a modest but rightful return to the taxpayers for their investment in the recovering state, and Democrats, who largely supported it even as they decried it as insufficient, irresponsible and political — coming as it would a month before the general election.

The Michigan League for Human Services said in a statement Wednesday that the measures would give $20 to a family of four earning $25,000 and $88 to a family of four earning $250,000. But it noted the proposed break comes after tax changes last year, when Snyder and legislative leaders “passed at least a $1.7 billion tax break for businesses (and helped) to pay for it with a $1.4 billion tax increase on individuals.”

Republicans countered that the tax cut is a great start after steps they took moved the state from years of deficits to a small surplus.

By: Jeff Karoub, Crain’s Detroit Business