House Democrats Say State Can Afford Bigger Middle Class Tax Cut

Tax cut works out better for high wage earners than middle-income families
Wednesday, June 6, 2012

LANSING - Members of the House Democratic Caucus grudgingly supported House Bills 5699 and 5700 today saying that a little tax relief is better than nothing, but argued that it is time for the Republicans to offer real relief to Michigan’s middle-class families instead of targeting the greatest relief to higher wage earners.

“Like Michigan’s hard working middle-class families, we will take what we can get from this Republican administration and Legislature, but we will not take the pennies they give back to the majority of our residents and go away quietly,” said House Democratic Leader Richard E. Hammel (D-Mount Morris Twp.). “Once again they are giving the biggest tax breaks to the people who make the most money, and they are using a significant chunk of the surplus money to give big raises to Governor Snyder’s appointees working in state government departments.”

House Bills 5699 and 5700 lower the income tax rate from 4.35 percent to 4.25 percent on Oct. 1, 2012 and increases the personal exemption by a nominal amount. This rollback was scheduled to happen anyway on Jan. 1, 2013. So the small rate reduction that will happen three months early on Oct. 1 will be one-time money. The tax cut means that taxpayers earning more money will get a better tax cut than those earning lower wages. In addition, middle-class earners suffer again because they lost or saw reduced tax credits and deductions that they relied on, while big corporations saw a tax cut at the same time worth more than $1 billion.

Republicans are only using a small fraction of the surplus to fund this small rate reduction while using other surplus funds to hire more high level state bureaucrats, and give raises to the governor’s highest paid political appointees. These are the same people who will enjoy the higher tax benefit from the new tax rate reduction.

“Once again the governor and his Republican colleagues have missed an opportunity to help Michigan families and senior citizens who need tax relief the most,” said House Democratic Floor Leader Kate Segal (D-Battle Creek). “It’s time that this Republican administration and Republican-controlled Legislature quit picking their well-off corporate friends and high-income earners to be the only winners when it comes to tax relief. Michigan’s economy depends on our middle-class families. If they can’t get more tax relief to help them keep food on the table and gas in their car so they can get to work, then Michigan’s economy will suffer. My colleagues and I will keep fighting for these families who deserve and need more than the Republicans are willing to give them.”

House Democrats tried on Tuesday to create genuine tax relief by offering amendments to:

  • Restore the Earned Income Tax Credit (EITC) to 20 percent of the federal amount;
  • Lower the income tax rate to 3.9 percent effective Oct 1, 2012;
  • Repeal the Pension Tax, restore the Homestead Property Tax Credit and restore a number of deductions and credits; and,
  • Provide an additional tax exemption for seniors who are paying more taxes this year because of the senior pension tax.

All of the Democratic amendments failed when House Republicans refused to bring them up for a vote.