Lawmakers a step closer to cutting income tax

Michiganders are a step closer to receiving an income tax cut after the state House passed legislation that would lower the tax rate from from 4.25% to 4.05%.

House Bill 4170 cleared the lower chamber on March 18 with a vote of 65-43.

Seven Democratic lawmakers voted for the bill to cut the rate: Reps. Kelly Breen of Novi, John Fitzgerald of Wyoming, Matt Koleszar of Plymouth, Denise Mentzer of Mt. Clemens, Reggie Miller of Van Buren Township, Angela Witwer of Delta Township, and Mai Xiong of St. Clair Shores.

The legislation, introduced by Kathy Schmaltz, R-Jackson, would also make the income tax rollback permanent — something Gov. Gretchen Whitmer prevented in 2023. The state at that time took in so much money from Michigan taxpayers that a revenue-based trigger in state law resulted in an automatic reduction in the tax rate. The Whitmer administration successfully fought to limit that relief to a single fiscal year.

“People need relief, and they need it now,” Schmaltz said in a press release.

When state government collects more money than it needs, Schmaltz said, that money should go back to taxpayers.

“Michigan collects a lot more revenue from taxpayers than it did prior to the pandemic,” James Hohman, fiscal policy director at the Mackinac Center for Public Policy, told Michigan Capitol Confidential in an email.

He added that the state’s increase in revenue has been in line with the rest of the country. Yet, unlike Michigan, most states have already lowered tax rates in response to revenue growth.

In 2007, then-Gov. Jennifer Granholm and the Legislature raised the personal income tax rate from 3.9% to 4.35%.

In 2015 Gov. Rick Snyder signed into law a bill that required the income tax rate to be reduced to 4.05% if growth in the state’s General Fund exceeds the inflation rate. This happened in 2022, and the income tax rate fell for 2023. Whitmer and Attorney General Dana Nessel prevented a permanent reduction of the personal income tax rate to 4.05%.

The Mackinac Center filed a lawsuit to preserve the lower income tax rate.

The Michigan Court of Appeals ruled in favor of the governor, and the Michigan Supreme Court refused to hear the case.