State lawmakers passed what was called a temporary tax hike in 2007, and it hasn’t been temporary. Thankfully, legislators passed a bill to bring the rate back down. It’s a good policy that will promote job growth, encourage small business and improve state competitiveness. It’s unfortunate that the governor will veto it.
We criticized the tax hikes when they happened and have continued to call for lawmakers to bring rates down. We’ve made the public aware of how much the state budget has grown and promoted the reasons why lawmakers should reduce taxes. We also offered some novel reasons why policymakers ought to cut taxes now, testified in support of the proposal in committee, and sent out statements to the media praising lawmakers when they moved bills to cut the tax.
The bill legislators passed reduces the income tax rate from 4.25% to 3.9%. It also creates a new child tax credit and boosts exemptions for seniors. The Senate passed the bill with Republican support and the House passed it with some Democratic legislators joining mostly Republican support.
One reason why lawmakers think it’s a good time to cut taxes is because the state has a lot of money on hand and the cost of living is going up. Economic growth gave the state more tax revenue, and the federal government has showered lawmakers with so much cash they haven’t figured out yet how to spend all of it.
Yet the governor claimed that the tax cut is “unsustainable.” That’s a tough argument to make when the policymakers have billions in extra money at their disposal and can anticipate even more revenue growth.
Besides, lawmakers ought to be worried about whether the growth of the state budget can be sustained. The governor proposed $72.9 billion in spending, a $14.6 billion increase from what the state spent before the pandemic. If policymakers cannot slice $2.5 billion from the $14.6 billion increase — which is how much less the state would collect under the tax cut — then they have a severe spending problem.
Michigan is not the only state that is trying to lighten its tax burdens. There are 14 other states that have cut taxes in the past year, and more states are coming. Michigan already taxes income at higher rates than everyone in the region, save Illinois.
Michigan residents deserve this tax cut. It’s good for the economy and affordable to the state budget. It’s excellent to see that legislators agreed and cut taxes even in the face of the governor’s opposition.