Whitmer vetoes GOP-led Legislature's $2.5B tax plan over constitutional issue

Gov. Gretchen Whitmer on Friday vetoed the Michigan Republican-controlled Legislature's $2.5 billion tax cut plan, arguing that the legislation violated a constitutional clause requiring the content of a bill to match the title. 

The Legislature used a House bill originally meant to extend a tax filing deadline and changed it to contain a "broad change to the tax code" that doesn't match with the bill's original purpose, Whitmer said. 

"The constitutional defects of this hurried process are both glaring and obvious," Whitmer wrote in her veto letter.

The Legislature passed the bill on May 19, just hours after Whitmer asked legislative leaders to consider sending $500 rebates to residents. Both plans continued a months-long tax cut battle between the GOP-led chambers and the Democratic governor over the best way to return surplus taxpayer money to residents. 

As of May 20, Michigan's budget surplus for the current fiscal year had grown to $6 billion and estimates continue to tick up for this year and next as sales and use and income tax revenue grows. 

With Friday's veto, the plan joins other tax relief proposals that suffered similar fates. Whitmer in April vetoed a gas tax suspension plan, in part because it wouldn't have been able to go into effect until 2023. And, in March, the governor vetoed a separate $2.5 billion tax relief plan because she said it would blow a "hole" in the state budget. 

Rep. Matt Hall, the Comstock Township Republican who sponsored the most recent legislation, lamented the governor's Friday veto, arguing the Legislature had tried to incorporate some of the measures she had requested. 

"I don't know if she will ever change her mind and allow hard-working taxpayers to keep more of their own money, but I do know House Republicans will continue to fight for tax relief and continue to give her the chance to finally do the right thing," Hall said. "This isn't over."

The House and Senate "Family Inflation Relief Plan" vetoed Friday would have lowered the state's personal income tax from 4.25% to 4% and increase the personal income tax deduction by $1,800 from $4,900 in the 2021 tax year to $6,700. The proposal would allow taxpayers to claim a $500 per-child nonrefundable tax credit. 

The bill also supported Whitmer priorities by boosting the state's earned income tax credit from 6% to 20% of the federal earned income tax credit and hiking the senior personal tax exemption.

The plan included a separate bill funding a property tax credit for disabled veterans. That portion of the package was not vetoed.

Whitmer's "MI Tax Rebate Right Now" plan announced the same day would provide $500 to families. The plan would provide households with an annual gross income of less than $250,000 a $500 rebate with $100 additionally for each dependent child. 

Whitmer indicated at the time that she favored her plan over the Legislature's because the rebate delivered immediate relief. 

Republicans argued their plan delivered long-term relief that wouldn't aggravate an economy already inflated by a variety of circumstances, including stimulus checks, unemployment aid and business grants issued during the pandemic.

Besides, Republicans argued Whitmer should sign their bill because it included priorities that she had outlined, including increased tax exemptions for retirement income and increases to the earned income tax credit. 

Whitmer on Friday reiterated her support for relief related to retirement taxes and the Earned Income Tax Credit.

"I look forward to meeting with you in the coming days to discuss next steps on a comprehensive approach to support Michigan’s working families," she wrote.

eleblanc@detroitnews.com