LANSING, Mich. (FOX 2) - In a late-night round of voting, the Michigan Senate approved a tax package that rolls back the state's retirement tax and boosts the earned income tax credit for families.
Missing from the passage was a third prong of what Gov. Gretchen Whitmer has pitched as ‘inflation relief' checks after Democrats failed to secure enough Republican votes. Approving the $180 rebate checks for each Michigan taxpayer would have required more votes from conservative lawmakers.
Instead, a permanent cut to the state's income tax rate may instead take effect.
As part of her second term as governor, Whitmer had pitched tax relief for families and seniors by repealing the retirement tax and increasing the average refund that families get from their tax returns.
"Michiganders need relief as inflation drives up costs and eats into their paychecks," she said in a statement. "That’s why I worked with the Michigan Legislature to pass the Lowering MI Costs plan to deliver a $1 billion tax break for seniors and working families."
The bill now goes back to the state House for a final vote.
After passing the state House, it passed the state Senate by a slim majority. In order for the package of bills to include the $180 rebate checks taking effect immediately, it would have needed more Republican support. The vote for immediate effect was postponed on Feb. 16.
During a late-night session in the chamber Tuesday night, a vote for immediate effect was defeated.
The $180 rebate checks would have shifted hundreds of millions of dollars out of the state's general fund. Doing so would have prevented a 2015 law that would have triggered a reduction in the state income tax.
The law was written that if general fund revenue exceeded a cap written into the bill, then it would trigger a tax cut. The reduction would be permanent - lowering the income tax rate from 4.25% to 4.05%.
Tax package savings
The biggest infusion of money for families is expected to be from the Earned Income Tax Credit change, which increases the money working families get from their tax return from 6% of the federal rate to 30%.
A single parent with two kids making $20,000 would have gotten $370 at the 6% rate. But at 30%, they'll receive $1,849.
Under the rollback of the retirement tax, seniors will see a rising percentage of their retirement income exempted from taxes. A 65-year-old in 2023 will see 25% of their income exempted form taxes - which would average out to about $1,000 in savings a year.