In News Releases, Tax and Budget

For Immediate Release
Feb. 24, 2022

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

House tax proposal continues push for inequitable impact on taxpayers, drastic impact on budget

Senate and House tax cuts will cost billions more than Michigan EITC increase, have less impact on residents with low incomes

LANSING—Today, the Michigan House of Representatives’ Tax Policy Committee voted along party lines to pass House Bill 5838, a proposal to significantly cut the personal income tax rate among other tax changes. According to analysis by the nonpartisan House Fiscal Agency, the bill would reduce available revenue for the budget negotiations by $2.4 billion  in the 2023 state budget and cost the state $1.7 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.

“Now that everyone’s tax proposals are on the table, the stark contrast is clear,” said Monique Stanton, President and CEO of the Michigan League for Public Policy. “Gov. Gretchen Whitmer has proposed targeted tax relief for residents who are struggling the most by increasing the EITC, and historic budget investments in all of the areas kids, residents, businesses and communities rely on. Legislative Republicans are pushing for sweeping, across-the-board tax cuts that primarily benefit the wealthiest residents and businesses while significantly decimating our current and future state budgets in the process.” 

“The price tags for the Senate and House tax proposals cost billions more than an EITC increase while having an inverse—or in some cases, literally nonexistent—impact on residents with lower incomes,” Stanton added. “As budget and tax negotiations move forward, we hope policymakers will support the EITC increase and budget investments that promote equity instead of a universal cut to the personal or corporate income tax that will only increase racial, economic and geographic disparities.”

Last week, the Michigan Senate passed its own partisan tax cut proposal, Senate Bill 768, which would implement universal tax cuts that will primarily benefit wealthy residents and profitable corporations. League CEO Monique Stanton raised similar concerns on the Senate tax cut, namely the inequitable impact of taxpayers and the adverse impact on the budget. 

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 and $92 for the middle 20% ($41,000-$70,000) of Michigan workers. At the same 3.9% rate, the average tax cut for the top 1% (making $539,000 or more) of Michigan earners is $4,901. The 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.

###

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.