Whitmer urges $500 rebate; House, Senate push $2.6B in tax relief

Lansing — Republican lawmakers in the Michigan House and Senate approved a wide-ranging $2.6 billion tax cut proposal Thursday, several hours after Democratic Gov. Gretchen Whitmer asked legislative leaders to consider sending $500 rebates to residents. 

The dueling plans revived a high-stakes debate over how Michigan's leaders should respond to increasing consumer prices, rising state tax revenues and a surging state budget surplus in a pivotal election year.

Revenue estimates for the current and coming fiscal years are expected to come in $4 billion to $5 billion higher than the state predicted in its last January estimate — a surplus not accounted for in current budget plans. 

Republican lawmakers, who control the House and Senate, want to spend that surplus on ongoing tax cuts. But Democrats have argued for immediate relief in the form of targeted tax reductions and have voiced concerns about the size of the estimated revenue losses resulting from the GOP tax proposals. 

In a speech, Senate Majority Leader Mike Shirkey, R-Clarklake, accused Whitmer of "pandering" with her rebate proposal.

"We are only beginning," Shirkey said Thursday of the GOP tax cut efforts. "But I damn proud of what this body is about to pass. And we are not done yet."

Whitmer's proposed MI Tax Rebate Right Now would provide $500 to "Michigan's working families right away," she wrote in the Thursday letter to lawmakers.

The plan, the Democratic governor said, would build on her proposed cuts to retirement taxes for some retirees and an increase to the Earned Income Tax Credit for mostly lower-income workers. 

"Let’s take advantage of our additional revenue to put money in people’s pockets and deliver real relief right now to taxpayers," Whitmer said in the letter. 

Rep. Matt Hall, the Comstock Township Republican who helped sponsor the Family Inflation Relief Plan, called the Legislature’s proposal a “serious” plan that would provide permanent relief while he criticized the governor’s $500 tax rebate as a “one-time gimmick.”

"Her plan is a very weak plan," Hall said. 

State surplus spurs tax relief plan

Whitmer's letter came a day ahead of the state's Consensus Revenue Estimating Conference, where budget leaders are expected to present tax revenue estimates that have kept up a trend of increases in the state coffers. 

A House Fiscal Agency analysis released Wednesday adjusted Michigan's general fund and school aid fund revenue upwards from its previous January estimate — by about $2.8 billion in the current fiscal year and $2.2 billion in the coming fiscal year.

The Senate Fiscal Agency also estimated an increase from January estimates but at a more modest rate — by about $2.8 billion in the current fiscal year and by about $1.1 billion in the coming fiscal year.

The revenue increases have spurred Republican lawmakers to push for broad and long-term tax relief.

The plan the House and Senate approved Thursday would lower the state's personal income tax from 4.25% to 4% and increase the personal income tax deduction by $1,800 from $4,900 in the 2021 tax year to $6,700. The proposal would also allow taxpayers to claim a $500 per-child nonrefundable tax credit, boost the earned income tax credit from 6% to 20% and hike the senior personal tax exemption. The package also would fund a property tax credit for disabled veterans.

The nonpartisan Senate Fiscal Agency projected the proposal would cut annual state revenues by $2 billion next fiscal year and $2.6 billion in Fiscal Year 2024.

Sen. Curtis Hertel, D-East Lansing, blasted the plan, saying it wouldn't provide the immediate relief that Whitmer's rebates would. Families need help now, he argued.

Hertel proposed Thursday a rebate plan that would provide households with annual gross income of less than $250,000 a $500 "inflation relief payment" with $100 additionally for each dependent child.

"You refuse to actually help them," Hertel said about the Republican plan. "At the end of the day, this is just a promise. But here’s the thing: You can’t buy gas with a tax cut in the future. You can’t buy groceries with a tax cut in the future."

The Senate approved the main bill in the tax proposal in a 22-14 vote, which was along party lines. Two Democrats were absent.

The House approved the main bill in the tax proposal in a 69-34 vote, with 14 Democrats voting in favor of the legislation and seven members absent. The lower chamber will vote on the remaining portion of the package on Tuesday.

Lawmakers, Whitmer clash on plans

At a Thursday Lansing event, Whitmer argued her proposed rebate would give immediate relief while the Legislature's plan would delay relief for about a year. Additionally, she stressed that the state's influx in tax revenue is likely one-time and shouldn't be used as an excuse to make long-term changes to the tax structure.

"It’s not a real plan," Whitmer said. "It is a massive move that they’re making using some one-time funds without really regard for what it's going to mean about our ability to invest in skills, to lure investment to Michigan, to invest in education.”

Hall countered that the Legislature attempted to deliver the immediate relief Whitmer is now calling for through a state gasoline tax pause, but the bill’s ability to take immediate effect was blocked by Senate Democrats and the bill ultimately was vetoed by the governor.

He said the Legislature’s tax relief proposal incorporated some of the items Whitmer noted as missing when she vetoed similar legislation earlier this year — such as an increase to the Earned Income Tax Credit.

“She should sign it because we’ve listened to her suggestions,” Hall said.

Sen. Ken Horn, R-Frankenmuth, said he would be willing to support Whitmer's $500 rebate proposal if she agreed to back the tax relief plan advanced by GOP lawmakers.

Horn said inflation is hurting Michigan residents, adding that many people in his district could not pay to replace their water heater in cash if it broke.

"We have to do something to let people know that we understand," Horn said. "If the governor wants to give away $500 cash immediately, fine and dandy. But this goes hand in hand with our plan, as well. We’re partners in this or we’re not.”

In plans advanced this month, the Michigan House and Senate advanced annual budgets that set aside about $1 billion in the House plan for tax relief and about $2 billion in potential tax relief in the Senate proposed budget.

The new plan from GOP lawmakers comes after Whitmer vetoed similar legislation earlier this month seeking to decrease the income tax rate, increase retirement tax exemptions and create a $500 child tax credit.

eleblanc@detroitnews.com