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Mich. House OKs bill to accelerate income tax cut

By Jeff Karoub
Associated Press / June 7, 2012
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LANSING, Mich.—Michigan taxpayers could get enough back from the state to pay for a fast-food lunch -- or two if they're thrifty -- under a measure approved Wednesday by the state House that aims to accelerate a pending income tax cut.

If approved by the Senate and signed by Gov. Rick Snyder, the tax cut would amount to an average of $10 per person during the fiscal year starting Oct. 1 and reduce state revenue by about $103 million, according to the House Fiscal Agency.

The proposal would move up by three months the planned drop in an individual's tax rate from 4.35 percent to 4.25 percent. That was originally supposed to happen last October before Gov. Rick Snyder and Republican lawmakers decided to delay it by a year.

The measure passed in conjunction with another that would increase how much someone can earn before taxes kick in. The personal exemption would climb from $3,700 per person to $3,950 per person on Oct. 1, then increase by $50 on Jan. 1, 2014, and by $100 on Jan. 1, 2017.

A few dollars in savings doesn't make a big difference for Mark Lankin, a machine operator who lives in the Detroit suburb of Ferndale. He said he'd rather see more money go to fixing roads.

"I don't think a lot of normal people would miss $10 ... if that money could go to something more useful," said Lankin, 53, who described himself as politically independent. "If you didn't have it in your hands, it really wouldn't matter."

Under policies pushed by Snyder and GOP lawmakers last year, individual taxpayers will pay over $500 million more to the state this year and $1.4 billion more to the state next year because of lost deductions and credits for property tax payments, charitable contributions, children, college expenses and other items. Most retirement income also now is covered by the state income tax, although public pensions used to be exempt.

The legislation generated heated exchanges between Republicans, who view it as a modest but rightful return to the taxpayers for their investment in the recovering state, and Democrats, who largely supported it even as they decried it as insufficient, irresponsible and political -- coming as it would a month before the general election.

"It's another slap in the face to Michigan's working families," said Rep. Vicki Barnett, a Farmington Hills Democrat, adding it represents "a nickel a day for a family making $50,000 a year." Although she supported the legislation, she said, "I will not wear myself out patting myself on the back."

The Michigan League for Human Services said in a statement Wednesday the measures would give $20 to a family of four earning $25,000 and $88 to a family of four earning $250,000. But it noted the proposed break comes after tax changes last year, when Snyder and legislative leaders "passed at least a $1.7 billion tax break for businesses (and helped) to pay for it with a $1.4 billion tax increase on individuals."

Republicans countered the tax cut is a great start after steps they took moved the state from years of deficits to a small surplus.

"Every dollar state government can return to the people is a win for taxpayers," said Montague Republican Rep. Holly Hughes.

James McLeish, a Rochester Hills independent who once leaned Republican but has been "looking the other direction lately," said he could expect more than lunch money based on his tax bracket. But the 57-year-old would rather see the $103 million go to schools, struggling municipalities or "anything that can put people back to work."

"Normally I'm very in favor of tax cuts," he said. "That little bit in my pocket ain't going to do much, but those little bits together might do some good."

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