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State Income Tax Reduction Proposal Moving Forward

Jan 29, 2014

Income tax reduction clears committee, goes to full state Senate
By Jake Neher

Plans to reduce Michigan's income tax rate are moving forward in the state Legislature. A state Senate panel approved a bill Wednesday that would phase in the tax cut over three years.

The income tax rate would go from 4.25% to 3.9% by 2017.

"This is a tax on work," said Scott Hagerstrom with the anti-tax group Americans for Prosperity of Michigan. "You want more of something? Tax it less. We want more work and more productivity."

Senate Bill 402 was introduced months ago, but it has been gaining support since state officials announced a large budget surplus. It now goes to the full state Senate.

The nonpartisan state Senate Fiscal Agency says the plan could cost the state almost $900 million a year when it's fully implemented.

Opponents of reducing the state's income tax rate say it would only benefit the state's wealthiest residents. They say low- and middle-income residents would see relatively small reductions on their tax returns. They say that $900 million dollars would be better spent supporting cash-strapped public schools and local governments.

"To gamble on a personal income tax cut, despite the evidence that tax cuts do little to boost the economy, puts basic public services at risk and undermines Michigan's fledgling economic recovery," said Karen Holcomb-Merrill with the left-leaning Michigan League for Public Policy.

Republicans in the state House on Wednesday introduced their own plan to reduce the income tax. House Bills 5265 and 5266 would implement a more modest cut, but it would reduce the rate further if income tax revenues continue to increase.