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Michigan Democrats, back in power in Lansing, eye quick action on tax cuts

people at a press conference
Rep. Matt Hall, R-Richland Township, on Wednesday announced Republican plans to expand the Earned Income Tax Credit. He accused Democrats of “gamesmanship” and slow-walking legislation introduced by Republicans to cut taxes. (Bridge photo by Yue Stella Yu)
  • Expansion of Michigan’s Earned Income Tax Credit is likely the first bipartisan legislation to pass this year
  • Raising the state credit from 6 percent to 20 percent of federal rate could save $350 a year for a family of four
  • Republicans and Democrats pledged bipartisanship, but clashed over who should get credit for tax cuts

LANSING — Democrats took control of the Legislature for the first time in four decades on Wednesday, pledging to work across the aisle for working families.

But on the first day of the legislative session, Republican and Democratic leaders clashed over who should claim credit for introducing a bipartisan tax cut proposal. 

Republicans and Democrats both submitted legislation on Wednesday to expand the state’s Earned Income Tax Credit (EITC) — a move that could save a few hundred dollars for 700,000 Michigan residents, according to data from the state Treasury

 

Democratic Gov. Gretchen Whitmer has listed it as a longstanding priority. She supported doubling the credit in her first state budget proposal and promised to prioritize an expansion when Michigan Democrats control the Legislature this year

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“This bill provides meaningful aid for working families struggling to put food on the table and gas in their cars,” said Rep. Nate Shannon, D-Sterling Heights, who sponsored the Democratic legislation.

Republicans are on board, even though they are sore that Whitmer and Democrats waited until this year — when power changed hands in the Legislature — to act. Rep. Bill Schuette of Midland sponsored the Republican expansion bill and said it is “sorely needed” to address “skyrocketing” inflation.

Regardless of the disagreement, quick action is likely, and the expansion could be the first bipartisan legislation to pass the Legislature this year.

The tax credit — created in 1975 under President Gerald Ford and expanded in 1986 under President Ronald Reagan — applies to lower-income families making less than $57,000 a year, averaging savings of about $2,467 in Michigan. 

Michigan also has an Earned Income Tax Credit, but it was reduced to 6 percent of the federal version from 20 percent under former Michigan Gov. Rick Snyder. 

Restoring the credit to its original value would cost the state $262 million per year, while increasing state credit by about $350 to $500 for an average family of four, according to an analysis from the Whitmer administration. 

House Minority Leader Matt Hall, R-Richland Township, urged Democrats and Whitmer to “get this done now,” while accusing Democrats of deciding “to put this (expansion) to this year, so they could get the credit.”

Amber McCann, spokesperson for House Speaker Joe Tate, D-Detroit, did not address the comment but said he is “happy to hear his Republican colleagues are onboard with supporting the priorities of the House Democrats.”

Lou Glazer, president of Michigan Future, Inc., told Bridge Michigan on Wednesday the fast action is “encouraging” and hopes the state could agree to expand the credit to 30 percent of the federal credit.

Other tax cuts proposal

Other tax cuts also could move quickly, especially as the state has a multibillion-dollar surplus.

Democrats this week reintroduced a bill to repeal the state’s pension tax, a tiered system established under the Snyder administration that applies a 4.25-percent income tax on pensions depending on when the taxpayer is born. 

“We cannot balance the budget on the backs of seniors,” Rep. Angela Witwer, D-Delta Township, said in a statement. “Responsible Michiganders who have saved and planned for their retirement for their entire lives should not see their fixed incomes reduced.”

Whitmer had supported phasing out the tax over a four-year period. Her administration estimated last year the plan would cost the state $495 million annually by 2025. A State Budget Office estimate at the time said nearly 500,000 households would save an average of $1,000 under the plan.

Hall on Wednesday criticized Democrats’ plan as primarily benefiting people with public pensions.

“A lot of seniors are going to be very surprised when this retirement tax (repeal) the Democrats put forward passes … and most of them get no relief,” he said.

Republicans have a competing plan to offer retirement tax cuts to seniors 62 years and older. The bill would allow seniors 67 years and older to deduct up to $40,000 from their income taxes annually, or $80,000 for joint filers. Seniors between 62 and 66 years old would be allowed to deduct up to $20,000 for individuals or $40,000 for joint filers. 

That amount would increase as inflation goes up, according to a House GOP press release.

“House Republicans want a plan that will give relief to all Michigan seniors across the board,” Hall told reporters.

Clash on first day of session

Besides disagreements about tax cuts, there were other kerfuffles on Wednesday, including who could submit the first bill of the session.

Hall accused Democrats, led by Tate, of “gamesmanship” and cutting in line, saying Rep. Andrew Beeler, R-Fort Gratiot, was “camping” at the Capitol overnight for the honor.

Eight Republicans — including three leaders of the House Freedom Caucus Reps. Matt Maddock, Angela Rigas and Steve Carra — also voted against Tate’s speakership Wednesday, even though speakers are usually elected unanimously. 

“We are going to have different opinions across this entire chamber,” Tate said. “But I’m not concerned about that. I’m just ready to get to work.”

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