Michigan lawmakers send Whitmer tax cuts; $180 payments are dead

• Senate sends tax deal to Whitmer without enough support for $180 onetime checks to all Michigan tax filers to take effect
• Legislation would phase out taxes on public and private pensions and expand the state’s Earned Income Tax Credit for lower-income workers
• Michigan’s income tax rate will likely fall to about 4.04 percent later because of increased state revenues

March 8: Inflation relief checks v. income tax cuts. What saves you more in Michigan?
March 7: Gov. Gretchen Whitmer signs Michigan tax relief, minus $180 checks

A wide-ranging tax deal to reduce taxes for lower-income workers and pensioners and funnel more money into business incentives is headed to the governor’s desk — but without onetime $180 rebate checks for all Michigan tax filers. 

House Bill 4001 passed the Senate 20-17 on Feb. 16, but was stalled at the time because it did not get the super majority required to have immediate effect, a procedural vote that allows legislation to become law immediately after it’s signed. 

As the bill was written, the $180 checks would only go to state filers if the bill took effect in mid-April. Without immediate effect, it will become law in 2024. 

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On Tuesday, Senate Democrats sent the bill to Gov. Gretchen Whitmer without relief checks after a second immediate effect vote failed to gain the necessary Republican support. 

"It's unfortunate those won't be going out," Senate Majority Leader Winnie Brinks, D-Grand Rapids, told reporters on the floor. "We were hoping we would be able to get Republican support for that. But unfortunately, they were unwilling to do so."

House Bill 4001 would phase out taxes on public and private pensions and expand the state’s Earned Income Tax Credit to 30 percent of the federal rate, up from 6 percent.

The tax expansion would save about 700,000 families some $600 per year, while 500,000 seniors would save an average of $1,000 from the pension tax.

Under the legislation, if corporate income tax collections exceed $1.2 billion in any given year, the state would redirect up to $600 million into economic development efforts, including $500 million for a business incentive program called the Strategic Outreach and Attraction Reserve Fund. 

The tax cuts had bipartisan support, but Republicans opposed the onetime checks because they would have stopped a likely drop in the state’s income tax rate triggered under a 2015 law tying the income tax to state general fund revenue growth. 

With state government sitting on a roughly $9 billion surplus, and inflation pinching pocketbooks, the trigger law could reduce the state’s income tax rate from 4.25 percent to as low as 4.05 percent, according to recent estimates from nonpartisan House and Senate fiscal agencies. 

Any cuts would be made official once final 2022 revenue numbers are confirmed, likely in March.

Sen. Aric Nesbitt, R-Porter Township, said in a statement that Senate Republicans’ united opposition to the bill “protected the automatic income tax rollback that is due to millions of Michigan residents who need permanently lowered taxes, not a one-time gimmick that disappears in one trip to the grocery store.”

The $180 stimulus would have provided more money to most lower- and middle-income filers this year, but the income tax cut would offer more savings within a few years.