(Source: MIRS.news, Published 02/07/2023) The tax cut deal House and Senate Democrats struck with Gov. Gretchen Whitmer is scheduled to move out of a legislative conference committee Wednesday, Feb. 8, despite agitation among progressives and other Democratic legislators that the $180 rebate proposal doesn't have much practical or political pop.
Several sources confirmed to MIRS that, as of tonight, all 56 House Democrats aren't on board with the announced compromise on HB 4001. In fact, one source questioned whether there were 46 "yes" votes at this point, let alone the 56 needed for passage.
The major issue is spending $800 million on rebate checks that the Governor confirmed today are going out on a household-to-household basis, meaning married couples filing jointly are receiving $90 a piece. This is a far cry from the $500-per-filer rebate the Governor talked about last year and an amount that would easily disappear during a family's weekly grocery store visit.
It appears the $180 number was derived to replace the $800 million that was going to the Strategic Outreach and Attraction Reserve (SOAR) until some Democratic legislators blew the whistle behind the scenes that they couldn't support more money going into "corporate welfare."
But instead of sinking this $800 million into priorities that Democrats ran on, the money seems to be a sop that voters will long have forgotten by August or November 2024, these sources say.
While legislative leadership acknowledges that some members may not “love” the plan, it's believed the D's will vote for it at the end of the day because it is a marquee, scorecarded bill that is hard to vote against. Who wants to be on the record voting against cutting taxes for retirees and working families?
MIRS has learned labor, police and fire organizations, in particular, will be following the vote closely because of the positive impact that unlimited pension exemptions will have on their retiree members.
Whitmer defended the rebate amount today when asked about it by reporters in Flint.
She said when the rebate checks are combined with the Earned Income Tax Credit expansion and the changes to how retirement income is taxed, it "dwarfs anything we've seen in decades" as far as the scale of the relief.
Giving targeted income tax cuts to those who need it better than, say, a cut in the income tax rate, which would give more money to those who make more money, she said.
"What we're trying to do is give relief right now," Whitmer said. "Betsy DeVOS doesn't need another tax break, but the people who serve her do."
The conference committee on HB 4001 is scheduled for 9:30 a.m., but is expected to go at ease until much later into the day. Democratic leadership could try to lure Republicans into voting for
HB 4001, but that's a tall order if it's made clear that the plan will not allow a projected income tax roll back to take place.
In related news, MIRS has learned that the expanded retirement exemptions that anchors
HB 4001 track closely with the version that previously passed the House. The bill allows retirees to receive their private or public pensions without paying state taxes on it through a four-year phase-in starting in 2023.
The tax-free exemptions would not apply to 457 plans, elective contributions to 401(k)s and 403b plans and early distributions from retirement plans.
Starting in tax year 2023, retirees could write off 25% of this retirement plan income. In the tax year 2024, they could write off 50%. In the tax year 2025, 75% and by 2026, the whole 100%.
The plan also keeps the standard retiree income exemption created by Gov. Rick SNYDER in 2012 as a replacement for getting rid of tax-free pension disbursements. For some retirees, particularly those who continue to work, the Snyder-era option may continue to make sense for them.
The size of this exemption was not available Tuesday night.
However, by the end of the phase-in, the estimated hit to the General Fund is likely to be more than $500 million.
