Lansing — A state House panel approved a plan to cut Michigan’s income tax rate to 4.05 percent from 4.25 percent in two years, adding to a slew of tax cut proposals that majority Republican lawmakers are debating in this election year.
Under bills passed in a 12-2 vote by the House Tax Police Committee, the income tax would fall to 4.05 percent by 2016 and drop another tenth of a percentage point in future years if tax revenue increases by a minimum amount.
Among other plans under consideration to tap the state’s estimated $971 million three-year surplus are a Senate proposal to cut the income tax rate to 3.9 percent by 2017 and Gov. Rick Snyder’s idea to partially restore a tax break for low-income and moderate-income homeowners and renters making less than $60,000 a year that he helped to scale back in 2011.
State Sen. Jack Brandenburg, R-Harrison Township, is sponsoring the legislation that cuts the income tax rate to 3.9 percent. The plan would reduce General Fund revenue $835 million to $873.5 million annually, according to a Senate Fiscal Agency analysis.
Snyder has not embraced the call of fellow Republicans for a long-term income tax rate reduction because his administration estimates that two-thirds of the nearly $1 billion surplus is one-time money that won’t be available in future budgeting years. Instead, he proposed targeted homestead property tax relief that is estimated to cost about $127 million a year.
During Wednesday’s House committee hearing, Republicans rejected Democratic amendments to tie the tax cut to their proposals to reinstate tax credits and exemptions that the GOP eliminated or reduced in 2011 as part of a business tax reduction.
Four separate tax-relief proposals are pending on the House or Senate floors, but lawmakers have not reached a broad deal on tax relief.