Lansing — The Michigan House on Thursday approved a $357.5 million tax cut plan that would expand the state’s personal exemption for all filers and create a new $100 tax credit for seniors.
The lower chamber approved the exemption bill in a 105-1 vote, signing off on a plan that would increase the personal exemption to $4,800 by 2020, up from the $4,300 expected in 2021. The senior tax credit, which would apply to any resident 62 years or older, was approved 100-6.
“This reform plan, plain and simple, is the right thing to do,” said sponsoring Rep. Roger Hauck, R-Union Township. “It will put more money into the pockets of our teachers, our first responders and our citizens. It will give factory and office workers relief.”
The Michigan Senate recently approved a separate tax cut plan that would expand the exemption and create a new child care credit. GOP Gov. Rick Snyder has discouraged both plans on budget grounds. Their full impact would not be felt until 2020 or 2021 and could complicate Snyder’s push for additional road repair funding.
“We have a broken culture in our political world where it’s OK to say we can spend money or we can cut taxes and do that now for short-term benefit and leave the bill for our kids,” Snyder said Tuesday in his State of the State address. “I don’t think that’s right either. If we’re going to do something, let’s make sure we’re paying for it.”
Snyder first proposed restoring the personal exemption this month after his administration determined it was inadvertently eliminated by a recent federal tax code overhaul. Officials warned the inaction could cost taxpayers $1.5 billion a year.
Legislators in both chambers responded by approving larger exemptions and tax cuts, setting the stage for House and Senate leaders to negotiate a final plan to send to the governor.
Most House Democrats joined the Republican majority in voting for the plan on Thursday, criticizing Republican President Donald Trump and the federal tax bill as they did so.
“That wasn’t tax reform,” said Rep. Sherry Gay-Dagnogo, D-Detroit. “This bill today is a tax cleanup bill. Cleanup. And I want the record to reflect that I am not the president’s cleanup woman.”
The House plan to expand the personal exemption is projected to cost the state $172.5 million in lost general fund revenue in 2020, and $157.5 million in 2021 and beyond, according to the non-partisan House Fiscal Agency. The proposed senior tax credit is projected to cost $200 million per year.
Snyder is expected to seek another $175 million in road funding next year on top of the $150 million in general fund revenue that will be dedicated under a 2015 law, said Kurt Weiss of the State Budget Office. The governor is also pushing for a significant bump in per-pupil K-12 school funding.
“I think a tax cut discussion needs to be balanced with ensuring investment priorities like roads and education can also be met,” Weiss said. “The governor laid out some investment priorities on Tuesday night that seemed to receive bipartisan support, so we need to find a path to make sure those priorities are funded.”
House approval of the tax cut plan comes nearly seven years since Snyder signed a major state tax code overhaul that cut taxes for business but eliminated many exemption and credits for individuals, creating what critics have called the “senior pension tax.”
The new plan would create a $100 senior tax credit for an individual filer and a $200 credit for joint filers.
“It’s time we provide relief to the people who have shouldered Michigan’s financial burden for decades,” said Rep. Jim Tedder, R-Clarkston, sponsor of the senior tax credit bill and chairman of the House Tax Policy Committee.
“As I have always maintained, money looks better in the citizens’ pocket than it does in the government’s pocket.”