GOP-led Michigan Legislature reaches deal to cut taxes by $2.5 billion

The Michigan House and Senate GOP have struck a compromise deal for a $2.5 billion plan to cut income taxes and create new tax credits programs for families and seniors.

The compromise includes the House plan’s $1.1. billion in tax breaks by dropping the personal tax rate from 4.25% to 3.9% and spending $1.5 billion to pay down pension debt, plus the Senate GOP’s $500 per child tax credit.

The compromised deal dropped the Senate GOP plan provision to lower the corporate tax rate from 6% to 3.9%. Michigan has roughly $6 billion in federal funds.

State Rep. Matt Hall, R-Marshall, welcomed the plan, which merges Senate Bill 768 with House Bill 5838.

“My focus continues to be on working families and seniors on fixed incomes who are seeing costs of everyday things go through the roof due to inflation,” Hall said in a statement. “This plan continues to stress elements I have fought for – relief for everyone and not just some. I also thought we could go farther in providing relief to people and this plan does that by giving more assistance to families."

An average family of four in Michigan would receive around $147 in tax relief; with the child tax credit, savings could be boosted to $1,147.

Many seniors could also receive additional tax relief through a proposed $600 million in exemption changes. The income exempted from taxes for people 62 and older would rise to $20,000 for individual filers and $40,000 for joint filers, instead of those 67 and older under current law.

An additional exemption would apply to retirement income – $20,000 for single filers and $40,000 for joint filers. With both exemptions, a person 62 or older with retirement income is eligible to exempt $40,000 for single filers or $80,000 for joint filers.

Once approved by the Legislature, SB 768 and HB 5054 will advance to Gov. Gretchen Whitmer. The first-term Democrat previously said the Senate GOP’s plan to cut the personal income and the corporate tax rate was unsustainable, but it’s unclear what she thinks about this plan.

Whitmer’s $74 billion budget aims to repeal the retirement tax, boost low-income family tax credits, and more.