Gov. Gretchen Whitmer’s proposal to issue $180 “inflation relief” checks to Michigan tax filers faces challenges and questions. (Courtesy photo)

Michigan Gov. Gretchen Whitmer and Democratic legislative leaders have proposed a plan that would issue $180 “inflation relief checks” early this year to Michigan residents filing taxes for the 2022 tax year. But Democrats, who hold slim majorities in the Legislature, will need support from skeptical Republicans to get the two-thirds majority needed to get the money into residents’ hands as early as this spring. 

Here’s what to know:

What Democrats are pitching

The rebate checks are part of a larger tax reduction proposal from Democrats, which also includes expanding the Earned Income Tax Credit for low-income workers from its current 6 percent up to 30 percent of the federal income.

The plan also includes eliminating all income taxes on public and private retirement pensions. It’s estimated that pension tax changes would save about 500,000 people some $1,000 per year.

What are the details of the tax relief checks 

According to the plan, singles filing separately would receive a check of $180 but couples filing jointly would receive one $180 check. It is estimated the checks would cost the state about $800 million, which would come from the state’s $9 billion surplus. 

According to a House Fiscal Agency analysis released Wednesday, married taxpayers who filed separate returns would still only receive $90.

Why Republicans appear reluctant to support the proposal

Republicans have criticized Whitmer’s pitch for the one-time checks, saying they don’t provide the kind of permanent tax relief residents need. They also say it’s a gambit by Democrats to avoid triggering a Republican-passed law that reduces the state’s income tax when the state’s surplus rises above a certain level.   

“Real, long term relief is what Michigan residents are looking for. Not some secret, convoluted plan that blocks an income tax cut and fails to provide relief to all seniors and struggling families,” Sen. Aric Nesbitt, R-Porter Township, wrote on Twitter.  

Then-Gov. Rick Snyder signed a 2015 law that hiked fuel taxes but would automatically reduce Michigan’s income tax rate in years where general fund revenue growth significantly outpaced inflation. Since the COVID-19 pandemic, the state has accumulated a $9 billion surplus. Non-partisan fiscal agencies projected revenue growth could automatically cut the state’s 4.25 percent income tax rate to as low as 4.04 percent. 

The rebate checks are poised to negate the potential income tax rate rollback by redirecting fiscal year 2022 corporate income tax collections before they technically reach the general fund.

The Democratic plan would also limit the possibility of automatic rate rollbacks in future years by putting up to $500 million in tax collections into a business incentive fund designed to attract large companies to Michigan. 

This year at least, Whitmer’s plan would help lower-wage workers more than the Republican plan. Cutting taxes would save $52 per year for filers who make $30,000, compared to $210 for those who make $100,000.

But the reduced income tax rate favored by Republicans would be permanent and save all filers more in the long run than a one-time check.

Why the refund checks need a two-thirds legislative majority to pass

Democrats now have slim majorities in the state House and Senate. Ordinarily, that majority would be enough to pass such a measure. 

But Democrats want the checks to go out quickly, and for passage to have immediate effect requires a two-thirds majority of the Legislature. That will likely mean negotiation with Republican lawmakers to gather needed bipartisan support. 

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