Senate passage of billions in tax breaks could derail state budget process before it starts

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

Senate passage of billions in tax breaks could derail state budget process before it starts

Better alternatives to promote equity include Michigan EITC increase, targeted investments to address state’s greatest needs

LANSING—The Michigan League for Public Policy issued the following statement on the Michigan Senate’s party-line passage of Senate Bill 768, which would implement universal tax cuts that will primarily benefit wealthy residents and profitable corporations.

Based on data from the national Institute on Taxation and Economic Policy, 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 benefits of a tax rate cut will go to the top 20%, and only 31% of the benefits flow to the bottom 80% of Michigan workers.

This statement can be attributed to League President and CEO Monique Stanton.

“Everyone in Michigan wants a strong recovery from the pandemic that includes better jobs and wages, healthier communities, and a thriving future. However, broad-based tax changes, like the cuts to the personal and corporate income taxes, will primarily benefit wealthy individuals and corporations, do little to help spur our economy and have a devastating impact on our ability to provide the services that our businesses and residents value. Moreover, with this proposal, the state risks losing vital federal aid under the American Rescue Plan Act, federal dollars that are supposed to be used to help Michigan’s workers, families, businesses and communities recover from the COVID-19 pandemic and its economic impacts. If policymakers are interested in tax relief, they should expand Michigan’s Earned Income Tax Credit for the workers and families most in need, which will boost local economies and have long-lasting impacts on the families that receive it.

“Instead of drastic tax cuts across the board, regardless of income or need, lawmakers should be providing robust educational opportunities, making transportation more reliable and sustainable, ensuring our water is safe, supporting families, and providing better social and built infrastructure. These tax cuts will lead to budget cuts when it comes to education and supports for workers and communities—the very things we need for our state to thrive. We will squander the opportunity to make these investments if this $2.5 billion tax cut for the wealthy passes the Legislature.”

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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.