Income Tax Cut Bill Clears Committee, Moves on to Senate Vote

By: Josh Sidorowicz Email
By: Josh Sidorowicz Email

Supporters of a state income tax cut got one step closer to their goal Wednesday with the Senate Finance Committee passing legislation calling for a gradual reduction of the state's income tax.

The legislation bumps the state's income tax down from 4.25 percent to 3.9 percent by 2017 as Republicans aim to cash in on Michigan's projected budget surplus.

With tax cut talk running rampant in Lansing in recent weeks, this latest proposal drew support from the free-market think tank Mackinac Center, which went as far as to call for an end to the income tax altogether.

"When you cut marginal income tax rates, you get stronger economic growth," said Jack McHugh, senior legislation analyst for the group.

"With economic growth, all good things are possible and nothing leads to economic growth more directly than reducing or eliminating state income tax."

For a family with around $40,000 of taxable income, the cuts mean about $140 back each year, or five dollars and some change per paycheck.

Arguments against the proposal contend the money might be better spent in the public sector.

"It's the margin that could allow us to restore some of the revenue sharing, it's the margin that could allow us to repair or at least get a good start on repairing some of our roads and bridges," said Charles Ballard, an economist and Michigan State.

"If you're happy with having some of the highest college tuition rates and having some of the worst roads in the country then maybe the tax cut is the right way to go."

The proposed cuts would result in a loss of state revenue of about $143 million in the first year, and up to a loss of roughly $873 million by 2017.

"We get far more for our money when we pull it together," said Susan Martin, who opposes the tax cut. "Giving back a few cents here and there to somebody on a tax reduction is not helping anybody frankly, unless you're very wealthy."

Sen. Rick Jones, R-Grand Ledge remained non-committal on the proposal, saying he'd like to wait to hear if Gov. Snyder presents any plans of his own in his budget presentation next week.

"I don't think there will be a clear direction until the governor's speech," Jones said. "I want to see more money spent on roads and education and if there's still a surplus then yes, some should be returned to people."

Gov. Snyder will make his budget presentation on Feb. 5. is happy to provide a forum for commenting and discussion. Please respect and abide by the house rules:

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