Legislature Approves Income Tax Reduction

Liz Gullett

Mar 04, 2022

This week, the House voted to approve of Senate legislation reducing the state’s income tax rate from 4.25% to 3.9%. The plan is similar to a House bill that was reported by the Appropriations Committee last week. In addition to the tax rate reduction, the bill lowers the eligibility age from 67 to 62 for those who can receive a tax exemption for their first $20,000 in income, or $40,000 for those filing jointly. The proposal adds an additional exemption for retirement income for those 62 or older. Lastly, it includes a $500 child tax credit for each dependent age 18 and younger. According to the nonpartisan House Fiscal Agency, over the current and next two fiscal years, state revenue would decline by a total of $6.5 billion.

Since the House made changes to the Senate-passed version of the bill, it was sent back to the Senate for their approval, which they voted in favor of. Prior to the concurrence vote, the Senate passed legislation reducing the corporate income tax from 6% to 3.9%, something they included in the bill when they sent it to the House, but the House removed prior to final passage.

The bill will now be sent to Governor Whitmer for her final consideration. It’s unlikely that she will sign the legislation given that the governor’s tax reform plan calls to fully remove the retirement tax and expand the Earned Income Tax Credit.

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