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Lansing — The Michigan Senate is moving fast on a new plan to cut taxes by boosting the state’s personal exemption despite budget concerns by Republican Gov. Rick Snyder.

The GOP-led Senate Finance Committee on Tuesday approved legislation that would raise the personal exemption for Michigan taxpayers to $5,000 by 2021, up from the $4,300 expected under current law. Snyder wants a smaller increase to $4,500 to offset unintended consequences of a recent federal tax code overhaul.

The panel also unanimously approved a new state tax credit for child and dependent care, a move chairman Jack Brandenburg called a “sweetener” for the package plan now heading to the Senate floor for consideration.

House Republicans on Tuesday introduced a separate plan that would increase the personal exemption to $4,800 for 2020 and create a new $100 tax credit for Michigan seniors, setting the stage for further negotiations between legislative leaders.

Snyder and Lt. Gov. Brian Calley last week proposed a “fix” to the federal tax cut law they said effectively eliminated exemptions that taxpayers use to claim the state version. Without action, the administration says the federal change could cost Michigan taxpayers a collective $1.5 billion a year.

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The Snyder proposal inadvertently reignited tax cut fever in Lansing, where Republicans are eager to enact a state break of their own.

“President Trump went big and bold in his tax plan for American families, and it is time we do the same here for Michigan families,” said Brandenburg, R-Harrison Township.

Like the governor’s plan, Brandenburg’s bill would restore the state-level personal exemption. But it would go further by increasing the exemption to $4,700 by 2020 and then raise it again with inflation in 2021, which Brandenburg said would bump it to around $5,000.

All told, the Senate bill would cost the state about $210 million in revenue when fully implemented, according to Brandenburg’s office, saving the average Michigan family about $125 per year.

The separate child tax credit bill advanced Tuesday would cost the state about $81.2 million a year, according to the non-partisan House Fiscal Agency. The credit could save a typical Michigan family of four nearly $500 annually, said sponsoring Sen. Margaret O’Brien, R-Portage.

“All of us have faced the challenge of providing adequate care for those who depend on us, and this bill would help ease that burden,” O’Brien said.

Snyder’s personal exemption proposal would have saved taxpayers about $35 per year to offset any inadvertent impact from the federal overhaul, said state Treasury specialist Ken Osborne.

“We do have concerns with going beyond that to the degree your bill does,” Osborne told Brandenburg, suggesting his Senate plan could strain the state budget.

“We’re always open to having that conversation about tax relief, but we think it needs to be done in conjunction with those budget discussions to make sure we can afford it and are planning appropriately,” he said.

House Republicans last year fell three votes short of passing a bill that would have cut the state’s 4.25 percent income tax rate. But the personal exemption plans could win support from more Democrats, who view it as a more form of equitable tax relief.

Sen. Steve Bieda, the lone Democrat at Tuesday’s panel meeting, abstained from voting on Brandenburg’s personal exemption bill, saying he wants to study the budget impact more before deciding his position on the measure.

“Conceptually, I do like this approach. However, I think we have to be fiscally responsible when we’re dealing with the tax rate and everything else,” Bieda said.

“The problem when we do these phase outs, and we’ve seen this before over the last 20 years, is we almost bind future Legislature’s when there are switches in the economy.”

Michigan Treasurer Nick Khouri and outgoing Budget Director Al Pscholka have urged legislators to consider $2 billion in spending commitments expected to hit the budget in coming years, including general fund money that will be dedicated to roads and pay for a voter-approved plan to phase out personal property taxes.

House Speaker Tom Leonard, who pushed the plan to cut income tax rates last year, said Tuesday he is backing the new proposal introduced by his colleagues that would raise the personal exemption and create a new senior credit for any resident over the age of 62.

“The governor’s revenue-neutral plan is well-intentioned, but we can do better,” Leonard, R-DeWitt, said in a statement. “Michigan’s hard-working taxpayers deserve more. They deserve a plan that delivers larger savings and bigger refunds.”

The House legislation was sent to the Tax Policy Committee chaired by Rep. Jim Tedder, a Clarkston Republican and one of the main sponsors of the three-bill package.

Senate Majority Leader Arlan Meekhof is supporting Brandenburg’s plan, which he called “a better way to go” than an income tax cut because the personal exemption “is more broad based” and “doesn’t pick winners and losers.”

Brandenburg told reporters he is not wedded to his personal exemption plan and would be willing to consider the House version as well.

“I’ll back whatever, and how much it takes, to get money into the taxpayers’ hands,” he said.

joosting@detroitnews.com

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