Lansing — A Senate committee on Wednesday approved legislation gradually reducing Michigan’s 4.25 percent individual income tax to 3.9 percent by 2017, hoping to cash in on a state flush with a budget surplus.
The Republican-controlled Senate Finance Committee voted 5-2 along party lines in favor of advancing the legislation to the Senate floor.
Gov. Rick Snyder has been hesitant to encourage a long-term income tax rate reduction, though he called for tax relief for “hard-working folk” in his State of the State speech earlier this month. He recently revealed his administration was studying one option of increasing the personal exemption to exclude the first $4,000 of income from the state income tax.
Senate Bill 402 would shave one-tenth of a percentage point off of the income tax rate this year, resulting in a $143.6 million reduction in tax revenue for the fiscal year that ends Sept. 30, according to the nonpartisan Senate Fiscal Agency.
The legislation would reduce the income tax by one-tenth of a percentage point each year until reaching 3.9 percent on Jan. 1, 2017.
State Sen. Jack Brandenburg, R-Harrison Township, is sponsoring the tax cut legislation, which has gained political steam in recent weeks after state economists projected a $971 million budget surplus over three fiscal years.
The Senate Fiscal Agency says when the tax cut is fully implemented, it will reduce general fund revenue by $835 million to $873.5 million annually.
“I submit that we have a moral obligation to return dollars to the tax-paying public at every opportunity,” said state Sen. Dave Robertson, R-Grand Blanc Township. “… (The money) belongs to them before it’s taken by us.”
Sen. Rebekah Warren, D-Ann Arbor, voted against the legislation and warned of the consequence to state programs funded by income tax revenue.
“$873.5 million does warrant a conversation about what is the best use of that money,” Warren said.