BY ANNA GUSTAFSON, MICHIGAN ADVANCE
MICHIGAN—Hundreds of thousands of Michigan families could soon see thousands of more dollars in their pockets if the state legislature backs Democrats’ plan to repeal the state retirement tax and expand Michigan’s Earned Income Tax Credit, Democratic leaders said during a press conference last week.
“Rolling back the retirement tax saves half-a-million households $1000 a year,” Gov. Gretchen Whitmer said during the Thursday press event at Heritage Hall, the visitor center at the Michigan State Capitol. “The vast majority of Michiganders will see real relief because of that. … Boosting the [EITC] delivers $3,000 to 700,000 homes. That is half the kids of Michigan who live in these households.”
For years, Democratic lawmakers have attempted to repeal the retirement tax implemented by former Republican Gov. Rick Snyder and increase the EITC—a tax break for low- and moderate-income working Michiganders making less than about $59,000—butRepublicans have refused to work out a deal.
Now that Democrats control the governorship, Senate and House for the first time in 40 years, they said their immediate priorities include axing the pension tax and upping the EITC in an effort to lift families from poverty and help Michiganders save money in the face of inflation.
In 2011, Snyder signed the highly controversial legislation establishing the state’s retirement tax that applies a 4.25% income tax on pensions. That same year, Snyder proposed cutting the EITC from 20% to 6%—meaning qualifying residents could claim a credit worth 6% of the federal amount on their taxes.
“Back in 2011, seniors and hardworking Michiganders saw the rug ripped out from under them,” Whitmer said.
The governor said she “fought against that” as a state senator but Democrats were unable to stop the 2011 changes from going through because they were in the minority.
“It was wrong then, and today we’re in a position to make it right,” the governor said.
State Sen. Kristen McDonald Rivet (D-Bay City) on Thursday introduced Senate Bill 3, which increases the EITC to 15% in 2023 and ends with a 30% boost by 2026. In the House, Rep. Nate Shannon (D-Sterling Heights) introduced House Bill 4002, which increases the EITC to 20% beginning in 2023. To roll back the retirement tax, Sen. Kevin Hertel (D-St. Clair Shores) and Rep. Angela Witwer (D-Delta Twp.) introduced Senate Bill 1 and House Bill 4001.
“What working families need most is more money in their pockets, and they need that right now,” Rivet said in a prepared statement. “This bill would deliver an urgent and essential tax cut for Michigan workers hit hardest by inflation.”
A number of high-profile organizations backed the Democrats’ plans, with the Michigan League for Public Policy praising the EITC increase and the AARP urging lawmakers to pass the pension tax repeal.
“Here at the League, we’ve championed the state Earned Income Tax Credit for more than two decades,” Michigan League for Public Policy President and CEO Monique Stanton said in a prepared statement. “We worked on the Michigan EITC’s creation in 2006, and we have been laser focused on restoring and expanding the state credit since it was drastically cut in 2011.”
Stanton said the money families save through the EITC helps them “pay for groceries, car repairs, school supplies, child care and more.”
Lt. Gov. Garlin Gilchrist also emphasized this point during Thursday’s press conference.
“This will help children focus on their schoolwork because their parents are able to actually get them school supplies and backpacks to carry them in,” Gilchrist said.
On Wednesday, Michigan Republicans announced their own set of plans to increase the EITC to 20% and ease the pension tax. Rep. Andrew Beeler (R-Port Huron) introduced House Bill 4008, which would allow single filers 67 years old and older to deduct $40,000 in income or $80,000 for joint filers. Those between the ages of 62 and 66 could deduct $20,000 in retirement individually or $40,000 jointly.
“The time is ripe for bold tax relief for the people of Michigan,” Beeler said in a press release. “Everyone in our state has felt constrained by inflationary pressure. Working families living paycheck to paycheck and senior citizens relying on their retirement income are paying more just to get by.”
In addition to the bills addressing the retirement tax and the EITC, Democrats announced during their first session Wednesday that they are introducing bills to expand Michigan’s Elliott-Larsen Civil Rights Act to include anti-discrimination protections for sexual and gender identity, restore the state’s prevailing wage law, repeal the anti-union Right to Work labor policy, and repeal Michigan’s 1931 law criminalizing abortion care.
“It’s an historic moment; we have 40 years of pent-up policy ideas, and we are ready to get to work,” Senate Majority Leader Winnie Brinks (D-Grand Rapids) said at the press conference. “… What our bills really boil down to is our desire to make Michigan a better place for young people, for seniors, for workers, for LGBTQ folks, really for everyone.
“We want to make it very clear today: We are listening to the priorities of Michiganders, and we are here to get the job done,” Brinks added.
This story was republished from Michigan Advance under a Creative Commons license.