Senate’s final passage of SB 768 should end focus on imbalanced tax cut, turn attention to real budget work

For Immediate Release
March 3, 2022

Contact:
Alex Rossman
arossman@mlpp.org
517-775-9053

Senate’s final passage of SB 768 should end focus on imbalanced tax cut, turn attention to real budget work

Lawmakers have responsibility to address state’s real investment needs, examine Michigan EITC increase, supports for residents with low incomes, other solutions

LANSING—The Michigan League for Public Policy issued the following statement on the inequitable and devastating impact of Senate Bill 768, a proposal to significantly cut the personal income tax rate among other tax changes. The bill passed the full Senate on a party-line vote today. The statement can be attributed to League President and CEO Monique Stanton.

“With the final passage of this lopsided and short-sighted tax cut, hopefully legislators can put the politics aside and turn their focus to realistic budget negotiations. This reckless bill is not a real plan—it prioritizes tax cuts for the wealthy and would result in drastic budget cuts meaning larger classroom sizes, increased barriers to healthcare access, and more potholes leading to higher car repair bills. But even the Senate’s political moves today raise major concerns about their priorities, as some policymakers continue to put deep tax cuts for wealthy residents and profitable corporations above the 70 billion other ways they could support our residents, businesses and communities and boost Michigan’s economy.

“With the state’s current one-time surplus, our policymakers have the opportunity to make historic and equitable investments in our schools, infrastructure and supports for kids, workers and families. They have a chance to make targeted, pragmatic tax changes like increasing the Michigan EITC, which benefits residents with the lowest incomes and greatest needs as well as our small businesses. And our leaders have the ability—and the responsibility—to put billions of dollars in federal funding to work helping our people and our communities recover from the pandemic. We hope the governor’s veto is swift, and we hope that the Legislature’s pivot to genuine budget work on the state’s legitimate needs is equally so.”

ADDITIONAL INFO:

Big Benefits for the Wealthy, Little for Everyone Else:
The legislative tax cut proposal passed today includes a universal cut to the personal income tax to lower it to 3.9%, a move that will primarily benefit wealthy residents. Based on data from the national Institute on Taxation and Economic Policy requested by the League, reducing the Michigan personal income tax rate to 3.9% would mean an average tax cut of:

• $12 for the lowest 20% (less than $23,000) of earners;

• $92 for the middle 20% ($41,000-$70,000) of Michigan workers; and

• A whopping $4,901 for the top 1% (making $539,000 or more) of Michigan earners.

An infographic from the League notes that based on these estimates, the personal income tax break will give the state’s lowest 20% of earners enough money to buy one pizza and the middle 20% of earners enough to throw a pizza party, while the state’s wealthiest 1% will get enough for a round-trip flight to Italy, where pizza was invented. ITEP’s analysis also found that 69% of the tax cuts will go to the wealthiest 20%, and only 31% of the benefits flow to the bottom 80% of Michigan workers.

Dangerous Fiscal Impact:
According to analysis by the nonpartisan House Fiscal Agency, SB 768 would reduce available revenue for the budget negotiations by $3.1 billion in the 2023 state budget and cost the state $2.4 billion dollars the following year–and likely each year going forward. These costs will require the state to either cut public services we all rely on or risk losing vital federal aid provided under the American Rescue Plan Act, dollars intended to help struggling workers, families and businesses recover from the economic impacts of the pandemic.

Sharp Contrasts in Equitable Tax Changes, Budget Investments:
The state budget has the potential to reduce disparities and bridge political divides, especially with our current one-time surplus and federal aid, and the League’s 2023 budget priorities continue to focus on ways to improve economic security and racial equity for all Michiganders. As the League’s recent budget analysis and column note, the governor’s budget includes a number of proposals to improve equity in the state, including increasing the Michigan Earned Income Tax Credit (EITC), making major investments to support students and schools with the greatest needs, and improving housing access, healthcare, assistance programs and other support for struggling families. A broad tax cut to drastically reduce state revenue will negatively affect our state’s ability to provide for its residents for years to come.

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The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on opportunity for all. Its mission is to advance economic security, racial equity, health and well-being for all people in Michigan through policy change. It is the only state-level organization that addresses poverty in a comprehensive way.