LANSING (AP) – Michigan lawmakers moved ahead Wednesday with another tax-cut proposal, this time to help 360,000 homeowners and renters who lost an income tax credit as part of a Republican-backed business tax cut a few years ago.
With a bipartisan and unanimous vote, the GOP-led Senate Finance Committee approved legislation to again make households earning between $50,000 and $82,650 a year eligible for the Homestead Property Tax Credit. The credit is worth up to $1,200 and is more substantial for seniors and lower-income earners.
The move came a week after Republican Gov. Rick Snyder proposed raising the income cutoff for the tax credit from $50,000 to $60,000 and changing a formula so qualifying individuals get more of a break. The same panel just two weeks ago voted to drop the income tax rate from 4.25 percent to 3.9 percent within three years, and a Republican-controlled House committee next week plans to pass an income tax reduction of its own after intensely debating the plan Wednesday.
The election-year maneuvering over tax relief – which is gaining traction partly because of a projected surplus – might not be resolved until May, when legislators get new revenue estimates before finalizing the next state budget. The debate is centered on how big the tax cut should be and who should get it.
“If we’re talking a $100-$200 million (cut) and we have 10 million people, if you give everybody a little break they’re not going to get much,” said state Sen. Dave Hildenbrand, R-Lowell, sponsor of the change in the property tax credit. “If we really want meaningful tax relief, I think it makes sense to target those lower-to-middle-income people.”
An estimated 1.3 million taxpayers would pay $103 million less in taxes in the first year under Snyder’s plan, equaling about $79 per filing. Refund checks would be mailed this summer because the cut also would be retroactive to last tax year.
Hildenbrand initially wanted his bill to help households with less than $70,000 in annual income – more than Snyder – but Republicans agreed to a Democratic amendment to raise the cutoff back to where it was in 2011 before the governor and GOP lawmakers eliminated or reduced various tax exemptions to offset a $1.6 billion cut in business taxes. Democrats have made the $1.4 billion in tax hikes on individuals a top issue ahead of the November gubernatorial and legislative elections.
“This is something that could work,” said Sen. Rebekah Warren, D-Ann Arbor. “This to me is the best place we can put it.”
She said restoring the tax credit to households with less than $82,650 in income would provide $270 million in tax relief per year, 2 times what Snyder is proposing. The panel also OK’d bills to speed up a recent law that gradually no longer charges sales tax on the full price of a vehicle if the buyer has a trade-in.
Also Wednesday, the House Tax Policy Committee debated a proposal to reduce the income tax rate from 4.25 percent to 4.05 percent by 2016. The bills would lower the rate another tenth of a percentage point starting in 2017 and in future years if tax revenue increases by a minimum amount. The rate could not drop for two straight years.
Committee Chairman Jeff Farrington, R-Utica, said he and other sponsors of the plan tried to take a “very pragmatic” approach to cutting taxes by not letting the income tax rate go below 4.05 percent unless revenue is up. Democrats, though, questioned how Michigan can fix its deteriorating roads and educate kids with less money.
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