DETROIT – A Michigan inflation relief plan first introduced by Democrats in early February has been finalized by lawmakers and is heading to the governor’s desk for approval. But some components of the initial plan did not survive in the Legislature.
Michigan Gov. Gretchen Whitmer is poised to sign off on the Lowering MI Costs Plan, which eliminates the state’s retirement tax over the course of a few years and increases tax credits for lower-income households.
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When announced on Feb. 6, Whitmer said the plan would include a $180 inflation relief check to all tax filers -- but that’s no longer the case.
Democratic lawmakers in the state House and Senate previously said they anticipated significant support for this plan from their Republican counterparts. The bill needed a supermajority to pass, but in order to get Republican lawmakers on board in a limited time frame, the plan was amended to exclude the relief checks.
Tax filers will not be receiving $180 inflation relief checks under the new plan.
“It’s unfortunate those won’t be going out,” said Michigan Senate Majority Leader Winnie Brinks. “We were hoping we would be able to get Republican support for that. But unfortunately, they were unwilling to do so.”
Though the originally planned $180 checks to tax filers seemed insufficient to some, Democratic leaders said those checks would help provide some immediate relief in addition to other relief-inducing measures included in the plan. Republican lawmakers showed opposition to that part of the plan, arguing that lowering tax rates would offer a more permanent solution to help provide relief than the checks would.
Issuing the $180 checks would have killed the opportunity to roll back Michigan’s income tax rate from 4.25% to 4.05% -- so, instead, the checks were cut.
“Senate Republicans protected the automatic income tax rollback that is due to millions of Michigan residents who need permanently lowered taxes, not a one-time gimmick that disappears in one trip to the grocery store,” said Senate Minority Leader Aric Nesbitt.
Still, the new plan intends to provide relief to a wide range of Michigan residents.
The Lowering MI Costs Plan is set to phase out the state’s retirement tax over a four-year period. Officials said the plan would “equalize the exemption on both public and private pensions.”
The Michigan Working Families Tax Credit’s match of the federal Earned Income Tax Credit will be increased from 6% to 30% under the new plan. Lawmakers say about 700,000 Michigan residents will receive an average of $3,150 with this tax credit. This change takes retroactive effect, meaning taxpayers can utilize the benefits during the 2023 tax season.
“This is long overdue relief for Michiganders after the rug was ripped out from under them in 2011, when the retirement tax was slapped on and the Working Families Tax Credit was gutted. It was wrong. Now, we are making it right,” Gov. Whitmer said Wednesday in a statement. “We’ve been fighting to get this done for over a decade and I am proud to have partners in the legislature committed to delivering real relief.”
Through the plan, an additional $50 million of surplus tax revenue will go toward Michigan’s Housing and Community Development Fund to help fund affordable housing projects for veterans, seniors and other at-risk residents. Another $50 million will go to grants that “turn underutilized office, commercial, or community space into places for people to enjoy, including affordable housing, parks, outdoor dining spaces, community gathering places, and more,” officials said.
After being approved by the Legislature, the plan now heads to Gov. Whitmer’s desk for final approval.