Updates About Revenue Reports

Both the Senate and House Fiscal Agencies released May revenue reports following the May Consensus Revenue Estimating Conference (CREC).

The Senate Fiscal Agency reported that revenues from taxes with the General Fund and School Aid Fund earmarks totaled $2.6 billion, which is a 8.9% decrease from May 2021. While total revenue collections came in lower than a year ago, tax collections for the month were $93.5 million above May forecasts. Net income saw a sizable drop - down 17.5 percent from last May - but that was largely due to a policy change last year that delayed the return date from April to May. Income tax witholding and sales tax were both up over last year’s levels.

The House Fiscal Agency reported cash collections from major taxes, penalties, interest, and lottery transfers totaled approximately $2.6 billion for May 2022, or $205.7 million less than May 2021. For fiscal-year-to-date, collections for FY 2021-22 were reported 19.8% higher than during FY 2020-21.

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).