Updates About Economy

On May 26, the Michigan State Senate passed a four-bill package, spearheaded by Republicans, to suspend the gas tax and 6 percent sales tax on motor fuel from June 15, 2022, until September 15, 2022.

Under the bill that would suspend the state’s gasoline tax, a substitute was adopted that would offset the revenue losses from this tax cut for local governments, providing a $300 million appropriation from the General Fund.

Senate Bills 972, 973, and 974, passed the chamber with strong bipartisan support by a vote of 36-1. The gasoline tax bill, which provided the $300 million appropriation, passed 30-7.

Previously, Governor Gretchen Whitmer vetoed a piece of gas tax suspension legislation, but with respect to this new package of bills, Whitmer was “encouraged” and her spokespeople have indicated the administration is working with the legislature to find common ground on the issue.

On May 19, the Michigan Senate swiftly approved, mostly along party lines, House Bill 4568 and Senate Bill 784 – a nearly $2.7 billion tax relief package. Subsequently, the Michigan House passed House Bill 4568, sending the bill to the Governor’s desk, but due to procedural restrictions, will wait until the following week to pass Senate Bill 784.

The measures would reduce the state’s income tax rate from 4.25 percent to 4 percent in the 2023 tax year. The bills also include an expansion of Michigan’s Earned Income Tax Credit from 6 percent to 20 percent in the 2022 tax year and increasing personal tax exemptions by $1,800. Finally, the bills include tax deductions for senior filers, dependents as well as disabled veterans. Senate Bill 784 addresses policy related to the spouses and surviving spouses of disabled veterans, as well as relief for local units of government.

During the floor debate, Democratic Legislators got up to speak to the tax cut proposal, saying it falls short of providing relief to Michiganders in the immediate term. Instead, the Governor and Democrats in the Legislature called for $500 in direct relief to families.

While tax cut proposals have been a focus of Republicans in the legislature for months, this particular effort to provide tax relief unfolded somewhat last minute after the House and Senate Fiscal Agencies released revenue numbers well above projections and budget balances between $4-5 billion for the General Fund and $4-5 billion for the School Aid fund going into Fiscal Year 2023. The effort also comes ahead of the Consensus Revenue Estimating Conference on Friday, May 20 where revenue projections will be finalized.

As the package passed the chambers along party lines, the bills did not garner enough support to be granted immediate effect. Thus, any tax relief would not go into effect until 90 days after the legislature adjourns sine die (next spring).