Michigan inflation relief checks may be in jeopardy, even as tax cut passes

• House OKs deal that includes $180 checks, cuts taxes for low-income residents and seniors and funds economic development
• The plan blocks a planned income tax rollback that would provide permanent relief to more residents
• The checks may not come this year unless Senate Republicans sign onto the deal

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LANSING — After five hours of wheeling and dealing and a dramatic finale, the Michigan House on Thursday approved a wide-ranging plan to lower taxes for lower-income workers and retirees and funnel more money into business incentives. 

The Democratic legislation also includes a $180 onetime check for Michigan tax filers. But that could be in jeopardy if Senate Republicans block the legislation from taking effect immediately.

Over howls from Republicans, the deal passed 56-53 without debate. Rep. Mike Mueller, R-Linden, was the lone Republican to join Democrats in support, while Rep. Dylan Wegela, D-Garden City, opposed the bill. 

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House Majority Floor Leader Abraham Aiyash, D-Hamtramck, said the legislation isn’t a deal that he “100 percent loves,” but said it provides quick relief for workers and retirees. 

“We are proud of the fact that we got this over the finish line,” he said, chalking up the final factor in getting 56 votes as “elbow grease.”  

The legislation now heads to the Senate, where Republicans could make or break the tax rebates.  As written, the checks would go to state filers if the bill is signed and takes effect by April 18. That means at least six Senate Republicans would need to support it to meet the two-thirds threshold required for immediate effect. 

In an unusual procedural move, Senate Republicans adjourned while Democrats were still meeting in caucus, preventing Democrats from considering the legislation Thursday.

House Bill 4001 would phase out taxes on public and private pensions and expand the state’s Earned Income Tax Credit to 30 percent of the federal rate, up from 6 percent.

The tax expansion would save about 700,000 families some $600 per year, while 500,000 seniors would save an average of $1,000 from the pension tax.

Both of those tax cuts have bipartisan support. But provisions to use $800 million to fund onetime $180 checks and spend $600 million on economic development are far more controversial.

One upshot of the Democratic deal is that it would negate an income tax rollback that otherwise would have been triggered by state general fund revenue growth in fiscal year 2022, which ended Sept. 30.

The state’s income tax rate was set to drop to 4.04 percent from 4.25 percent, which would have saved filers who make $100,000 about $210 every year and those who make $30,000 about $60 per year. 

The Democrats used some accounting maneuvers to work around the rollback, redirecting $800 million in corporate income taxes to avoid it going into the general fund and triggering a rate reduction.  The plan doesn’t eliminate the trigger law, but it makes it less likely to be used in future years.

House Republican Leader Matt Hall, R-Richland Township, blasted the deal, saying Democrats who took control of the Legislature in January approved it largely without any public scrutiny.

“It would be much better if we had gone through committees, right, if we had worked and actually tried to negotiate something here,” Hall told reporters Wednesday. 

Under the legislation, if corporate income tax collections exceed $1.2 billion in any given year, the state would redirect up to $600 million into various economic development efforts, including $500 million for a business incentive program called the Strategic Outreach and Attraction Reserve Fund. 

Whitmer touted annual deposits as a way to sustain a program she has credited with helping the state secure jobs from “transformational” developments like a General Motors Co. expansion in Lansing, Ford electric vehicle production in metro Detroit and a Hemlock Semiconductor investment in Saginaw County. 

The Democratic holdout, Wegela, said he supported most of the legislation but opposes what he called a “corporate handout.” 

“I think we have better ways to spend our money,” he said, later adding, “This is like my one really, really passionate, unmovable issue.” 

Much of the House session time on Wednesday and Thursday was spent trying to gin up the 56 votes necessary to obtain a majority, and Democratic leadership and Whitmer staffers could frequently be seen meeting with individual lawmakers. 

Wegela estimated he was called over 100 times. 

Rep. Veronica Paiz, D-Harper Woods, was also present in the House gallery on Wednesday and Thursday anticipating a vote on the legislation despite a recent COVID-19 diagnosis. 

House protocol follows CDC guidance and recommends COVID-19 positive individuals isolate themselves at home for five days and wear a mask for up to 10 days after. 

Amber McCann, spokesperson for the House Democrats, said that guidance is enforceable for House employees, but said it’s ultimately the individual lawmaker’s decision on whether they come in when they’re sick. She said House leadership was not compelling lawmakers to attend when they’re ill.

The vote itself came abruptly and without the opportunity to give floor speeches, which devolved into infuriated House Republicans shouting from the floor to be given the opportunity to speak. 

“What are they afraid of?” Rep. Andrew Fink, R-Hillsdale, told reporters following the vote. “If they’re not going to talk to us about what’s going on or allow us to weigh in on the actual legislation…this is all about the merits of this stupid bill that they are afraid are going to be exposed.”