Tax rebates planned by Gretchen Whitmer, Democrats as part of relief package

• Plan will include expansion of Earned Income Tax Credit, repeal of tax on retirement income and ‘inflation relief checks’
• Republicans upset there is no guarantee of an automatic income tax rollback
• More details likely coming next week

March 1: Michigan lawmakers send Whitmer tax cuts; $180 payments are dead
Feb. 16: Tax deal clears Michigan Senate, but inflation checks remain in limbo
Feb. 13: Michigan inflation relief checks: Why GOP is fighting Whitmer rebate plan
Feb. 8: Michigan inflation relief checks 2023: what to know about Whitmer's plan
Feb. 6: Michigan inflation relief checks: Whitmer seeks $180 per taxpayer

LANSING — Michigan Gov. Gretchen Whitmer and Democratic leaders on Friday announced a framework agreement for what they said would provide “the largest tax break to Michiganders in decades.” 

The deal includes new “inflation relief checks” for all taxpayers, along with an expansion of the Earned Income Tax Credit for low-income workers and the repeal of the state’s 4.25 percent tax on retirement income, they said.

The deal comes after weeks of tax cut negotiations behind closed doors, and likely could move to the Legislature for a vote as soon as next week.

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Neither the governor nor legislative leaders offered specific details about the plan. They declined to reveal the size of the planned tax rebate checks and whether they will be distributed instead of a potential permanent cut to the state’s 4.25 percent personal income tax rate. 

Two sources familiar with the plan said more details will be announced next week, including the potential amount of the tax rebate checks, which could be sent to Michiganders as early as this spring. They would not go on the record because they are not authorized to speak on the issue.

The sources said the deal would expand the Earned Income Tax Credit to 30 percent of the federal level, retroactive to this year, as previously proposed by Senate Democrats. That’s up from the current 6 percent rate and higher than the 20 percent initially proposed by House Democrats. 

The expansion could save about 700,000 taxpayers an average of nearly $600 per year. The credit is for lower-income earners, with families who earned less than $57,414 qualifying last year. 

While details of the debate aren’t known, Whitmer in the past has advocated sending $500 checks to families from the state’s surplus. 

Likewise, it’s not immediately clear if the plan will call for immediate repeal of the pension tax or include a multi-year phase in, as proposed by the governor last year. The Whitmer administration estimates repeal could save about 500,000 households an average of $1,000 per year. 

“Inflation has driven the cost up on everyday goods, which is squeezing household budgets and forcing families to forego necessities,” Whitmer, Senate Majority Leader Winnie Brinks of Grand Rapids and House Speaker Joe Tate of Detroit said in a joint statement. 

“That’s why they sent us to Lansing to lower costs and put more money back into people’s pockets. We heard Michiganders loud and clear.”

After flipping the House and Senate last fall, Democrats control both chambers of the Legislature for the first time in 40 years. They have narrow two-seat majorities, however, which means they would need some Republican support for the tax legislation to take effect immediately. 

While some GOP lawmakers supported earlier versions of the pension tax repeal and Earned Income Tax Credit expansion bills, they’ve also raised alarms that Whitmer and the Democratic-led legislature could try to circumvent an income tax rate cut that may be triggered by a 2015 law because of growing state revenues.

Democrats have said they don’t plan to repeal the law, but they haven’t ruled out the possibility of trying to avoid the rate reduction.

Crain’s Detroit, using unnamed sources, reported this week the Whitmer administration proposed diverting $800 million of tax revenue toward the state’s economic incentive fund for fiscal year 2022, with another $500 million investment annually for three consecutive years. The plan would reduce general fund revenue otherwise expected to trigger the income tax rate reduction. 

Republicans have expressed concerns the proposal would eliminate the legislative oversight needed to appropriate funds to economic development projects.

In a Friday afternoon statement, Senate Minority Leader Aric Nesbitt said Republicans in the upper chamber are “cautiously optimistic that Gov. Whitmer may finally be heeding our call for immediate inflation relief for Michiganders.”

But Sarah Anderson, executive director of the conservative Michigan Freedom Fund, called the new Democratic framework a “Band-Aid scheme” that stops short of permanent relief for all taxpayers. 

“The Democrats proposal is a head fake intended to hide their attempt to rob Michigan taxpayers of an income tax cut in favor of funding a corporate welfare slush fund – prioritizing big corporations over Michigan families,” Anderson said in a statement.