Michigan Lawmakers Approve Pension Tax Relief, Expand EITC

Ask and you shall receive.

On Wednesday, Gov. Gretchen Whitmer used her annual State of the State speech to once again push for tax breaks in the state Earned Income Tax Credit and how the state taxes pension plans.

On Thursday, the state Legislature gave her just that.

Lawmakers approved proposals that would provide some $1 billion in tax cuts. Senators voted 27-11 to expand the state’s Earned Income Tax Credit, which will save low-income workers about $442 million a year on their tax bills.

The Senate also voted (23-15) to change how the state taxes retirement income, bringing back an exemption for public pensions.

The bills have to go to the state House, which passed its own versions of both the retirement tax repeal and earned income tax credit increase. They differ slightly from the Senate bills, in that the House’s retirement tax repeal would be phased in over four years through 2026. Its earned income tax credit matches the Senate’s rate of 30% of the federal credit.

Representatives passed the House’s retirement tax repeal 67-41. The Earned Income Tax Credit passed on a much wider vote, 100-8.

Although both bills passed both chambers with bipartisan support, not everyone was happy, with Republicans saying they didn’t go far enough. Democrats disagreed.

“The time is now to provide our seniors with the extra money that they need,” Sen. Kevin Hertel, D-St. Clair Shores, told The Detroit News. “The time is now to restore the promise that we have made to seniors across this state.”

Senate Minority Leader Aric Nesbitt, a Republican from Porter Township, told The News the retirement tax changes would primarily benefit individuals with large pensions from government jobs and would only help one-third of the seniors in Michigan.

“How is that fair? How is that equitable?” Nesbitt asked, according to the paper.

In a statement issued Thursday, members of the EITC Coalition praised the actions.

“The Michigan legislature has worked hard and quickly to provide meaningful economic relief for hardworking Michigan families,” said Ken Sikkema, former GOP Senate Majority Leader and a co-chair of the Michigan Consensus Policy Project, a bipartisan group of former policymakers. “Expanding Michigan’s EITC now will help struggling businesses find employees and support Michigan’s working families as they deal with the impact of inflation by putting money back in the pockets of Michigan’s hardworking residents.”

The Michigan League for Public Policy also issued a statement Thursday, saying the group “applauded the House for taking swift action” and calling the legislation a “huge win for hard-working Michiganders.”

“Boosting the EITC to 30% of the federal credit means $750 on average for families struggling to make ends meet due to low wages,” said League President/CEO Monique Stanton. “That could pay for a month of healthcare for a family, nine months of diapers, ten months of internet. And making the credit retroactive means families can get those funds now, as prices on household goods continue to rise, rather than waiting a full tax year.”