The Democrats’ plan comes after the House Republicans’ failed attempt to eliminate or reduce the state income tax in the wee hours of the morning on Feb. 23.
“We can provide tax relief to families who need it without bankrupting the state,” said Wittenberg. “Our plan will make a real difference for working families and help fix our crumbling roads and invest in our children’s future.”
The lawmakers said their plan would help fix three critical problems — our broken tax system, crumbling roads and underfunded schools.
“Low- and middle-income families are contributing nearly twice as much of their income in state and local taxes as the top 1 percent,” said Warren. “There is no reason families living in poverty and our middle class should contribute nearly twice as much of their income as millionaires and billionaires.”
The bottom 80 percent of households, those earning $102,000 a year or less, contribute 9.2 to 9.5 percent of their income in state and local taxes, while those in the top 1 percent contribute only 5.9 percent, according to an analysis conducted by the Institute on Taxation and Economic Policy (ITEP).
“This legislation would provide tax relief to families with the highest tax burden, while asking the wealthiest in our state to contribute the same share of their income as everyone else,” said Cochran.
According to data from the Michigan Department of Treasury, 94 percent of families would receive a tax cut under their plan to establish a graduated income tax that equalizes the state and local tax burden for all Michigan families.
“If we’re going to have a conversation about taxes, let’s look at our overall tax burden,” said Ellison. “Our plan would equalize our state and local tax burden by cutting taxes for 94 percent of families, those making $200,000 a year or less.”
Michigan is one of only eight states with a flat income tax, while 33 states have a graduated income tax, according to the Tax Foundation, a nonpartisan tax research group.
“Most Michigan families have been hit hard over the last two decades,” said Wittenberg. “Our incomes have declined and it is getting harder to save for retirement as the cost of living continues to rise. On top of that, our tax code is stacked against the families who have been hit the hardest. Our plan would put more money in their pockets and ensure everyone contributes their fair share.”
Under their plan, a family making $80,000 in taxable income would save $600 (18 percent) a year. Their effective tax rate would be 3.5 percent versus the current 4.25 percent.
With Tax Day quickly approaching, the Democratic lawmakers encouraged residents to visit www.MITaxEquality.com to learn what tax equality means for them.
“Under our plan, a middle-class family with $50,000 in taxable income would save $525 (25 percent) a year,” said Warren. “Their effective tax rate would be 3.2 percent versus the current 4.25 percent.”
The tax equality website allows residents to calculate their tax savings/increase, effective tax rate and percentage savings/increase at the click of a mouse by entering their taxable income and selecting single or joint filer.
“The tax equality website will allow every Michigander to find out what tax equality means for them,” said Cochran. “House Republicans certainly didn’t want residents to know what their 2011 tax reforms meant for them when they passed the largest tax increase on Michigan families and retirees in our state’s history.”
According to the House Fiscal Agency, the Democrats’ plan would generate $870 million in new revenue.
“Our plan would help fix three critical problems — our broken tax system that asks twice as much of working families than billionaires; our roads, which Republican lawmakers have let fall into disrepair; and our schools,” said Ellison.
In November 2015, Gov. Snyder and Republican lawmakers held a press conference to sign a plan they said would fix Michigan’s crumbling roads. However, earlier this month the Michigan Department of Transportation testified before a Senate subcommittee that the percent of state roads that are in poor condition would more than triple in the next decade — from 16 percent as of 2015 to 54 percent in just 10 years.
“Republicans claimed victory back in 2015, but they aren’t fooling anyone,” said Wittenberg. “It’s time for a real fix to our broken tax system and roads.”
Similarly, a report commissioned by the state in 2016 found that the state is significantly underfunding K-12 education.
“If we want our state to grow and evolve, we must ensure that our education system is adequately funded,” said Warren. “It’s time to invest in the future of our state before it is too late.”The graduated income tax the lawmakers are proposing would equalize the state and local tax burden by cutting taxes for 94 percent of Michigan families, those making $200,000 a year or less, as shown in the following analysis produced by ITEP:
The House package includes:
- House Joint Resolution K (Rep. Cochran)
- House Bill 4436 (Rep. Wittenberg)
- House Bill 4437 (Rep. Ellison)
The Senate package includes:
- Senate Joint Resolution I (Sen. Warren)
- Senate Bill 295 (Sen. Warren)
- Senate Bill 296 (Sen. Warren)