Whitmer vetoes Legislature's $2.5B tax cut plan, says it would blow 'hole' in budget

Lansing — Michigan Gov. Gretchen Whitmer vetoed a $2.5 billion tax relief plan advanced by the Republican-led Legislature Friday afternoon and instead touted her own plans for tax savings that would benefit some retirees and lower income earners.

Whitmer signaled earlier this month her likely veto of the Legislature's plan, which would have lowered the personal income tax from 4.25% to 3.9%, increased exemptions for retirement income and created a $500 child tax credit. 

Whitmer previously has said the plan was "fiscally irresponsible" and "unsustainable." On Friday, the governor said the proposal would have the long-term effect of creating a "recurring, multibillion-dollar hole in basic state government functions."

"It would force tax hikes on families or deep and painful cuts to services, hurt our children's ability to catch up in school, force layoffs of cops and firefighters, and kneecap our ability to keep fixing crumbling roads," the Democratic governor wrote in her veto letter.

Senate Majority Leader Mike Shirkey, R-Clarklake, blasted the veto in a statement Friday, arguing the Legislature's plan would have benefited every Michigan resident instead of the limited groups addressed in Whitmer's plan. 

“What Gov. Whitmer is telling Michiganders with this veto is that she knows how to spend their money better than they do. She doesn’t," Shirkey said in a statement. 

“No Michigander is immune from record-high gas prices and inflation, and no Michigander should be excluded from tax relief," he said. 

House Speaker Jason Wentworth, R-Farwell, accused Whitmer Friday of failing to deliver tax cuts for Michigan residents in need of financial relief. 

"People are struggling to make ends meet and pay their bills," Wentworth said in a statement. "We need real leaders who say what they mean and do what they say, not politicians who wait for 5pm on a Friday to quietly go back on their campaign promises."

Sen. Michael McDonald, R-Macomb Township, called Whitmer's veto a twist on "March Madness" and accused her of playing "the role of a power team that crushes the hopes of the underdog."

The veto came hours after Whitmer in a separate press release outlined her "More for MI Money Plan," which pushed for a suspension of the 6% sales tax on fuel, the elimination of retirement taxes for some seniors and an increase in the Earned Income Tax Credit for low-income earners. It essentially added the sales tax suspension to her previously announced tax relief plan outlined in the State of the State address. 

Whitmer and the Republican-led Legislature have been locked in a battle for several weeks over the best way to get some of the state's $7 billion in surplus back into taxpayer hands during an election year. 

Whitmer has proposed a record $74 billion budget plan for next year that includes her tax cuts for some seniors and low income earners. 

Whitmer's administration has argued that her tax cut falls within the bounds of rules tied to the billions of dollars in federal COVID relief dollars still available to the state. The 2021 American Rescue Plan requires drops in revenue due to tax cuts be paid for with alternative revenue increases or spending cuts.

The Republican spending plan is likely to exceed the state's revenue growth so it would require a leaner spending plan than the $74 billion budget Whitmer proposed for next year and future budget years. 

A House Fiscal Agency analysis found the plan's personal income tax cut and retirement exemption increases alone would leave the state about $1.8 billion short of the federal requirements to implement the tax cuts in fiscal year 2022-23 and $1.1 billion short in fiscal year 2023-24. Those shortfalls would have to be returned to the federal government or cut from Whitmer's proposed $74 billion budget. 

In her letter to the House and Senate, Whitmer also said she plans to veto a separate bill to suspend the state’s 27-cent-per-gallon gas tax for six months. The reason, the governor said, was because the proposal didn’t gather enough support from Democrats in the Senate to take effect immediately. Without two-thirds of the Senate in support, bills would take effect after the year’s session concludes.

“Our shared goal is to lower costs, but this misguided proposal does nothing for Michiganders facing pain at the pump right now,” Whitmer said.

The proposal in question has passed the House and the Senate, but GOP leaders have not sent the proposal to Whitmer’s desk. It’s unclear whether they will.

Whitmer on Friday also vetoed a bill that would have required clerks to continue processing concealed pistol licenses during a state or local emergency.

eleblanc@detroitnews.com