House panel approves Mich. income tax cut

By David Eggert Associated Press LANSING (AP) -- Michigan's income tax rate would drop two-tenths of a percentage point over the next two years and go down more in the future if tax revenue increases by a minimum amount under bills approved Wednesday by a House committee. With the 12-2 votes, there are now four separate tax-cut proposals pending on the floors of the Republican-led House and Senate in addition to one suggested by GOP Gov. Rick Snyder. Legislators and the governor want to provide election-year tax relief with part of a budget surplus, but there's no consensus yet on what form it should take. The latest plan -- backed by House Republicans who handle tax policy -- would lower the 4.25 percent income tax rate to 4.15 percent in October and to 4.05 percent in January 2016. Starting in October 2017 and in future years, the rate would drop one-tenth of a percentage point if general fund revenue rises by at least $300 million from the previous year and matches at least the rate of inflation. The income tax rate couldn't be reduced for two straight years. "It kind of takes the politics out of looking at tax breaks during years of campaigns and not looking at it in non-election years," said House Tax Policy Committee Chairman Jeff Farrington, R-Utica and a sponsor of the legislation. "I really like how it's an automatic thing. If we're growing and (the economy's) prosperous, then it'll kick in so that you don't have long periods like the 1990s where you have a tremendous amount of growth and government gets bigger and you can't sustain that when times aren't as good." He said the average household would save $100 a year under the plan. Majority Republicans on the panel rejected Democratic amendments that would have let the tax cut become law only if their proposals to reinstate tax credits and exemptions that were eliminated or reduced in 2011 also are enacted. Snyder and the GOP effectively raised taxes on many households three years ago to offset a business tax cut. Rep. Jim Townsend, D-Royal Oak, criticized the income tax cut, saying it would disproportionately favor higher earners and come nowhere close to helping pensioners, parents, low-income workers and homeowners who saw their taxes go up much more under the 2011 changes. Republicans "are more interested in doubling down on a failed policy of tax giveaways to the wealthy and crumbs for the middle class," he said. "If we're going to change taxes, we should be helping the middle classes, not the wealthy because the wealthy are already doing OK." According to the nonpartisan House Fiscal Agency, the legislation sent to the full House would save taxpayers $222 million in the next fiscal year and more than $400 million in the 2015-16 budget year. Snyder, who favors a more modest $100 million tax cut averaging $79 per claimant that would be retroactive to last tax year, has proposed raising the income cutoff for the Homestead Property Tax Credit from $50,000 to $60,000 and changing a formula so qualifying homeowners and renters get a bigger break. ---------------- Online: House Bills 5265-67: http://1.usa.gov/1nOvQIY. Published: Fri, Feb 21, 2014