Michigan lawmakers consider proposal to lower state income tax rate
A retroactive State of Michigan income tax cut proposal is moving through the state legislature, with the bill being passed to the Senate.
It would revert the 2025 state income tax rate to 4.05%, the rate that was in effect during 2023. The tax rate bumped up to 4.25% for 2024. The lower rate also would be retroactive to January 2025. Any difference to taxpayers would show up as refunds or lower tax bills when 2025's income taxes are filed.
The legislation, House Bill 4170, had the sponsorship of about two dozen state representatives. It was introduced on March 5 and passed the House Tuesday on a vote of 65 to 43, with two not voting. It now goes to the Senate for consideration.
The income tax cut is based on the rollback premise that if general fund revenue outpaces inflation during the state's fiscal year, the individual income tax rate must be reduced proportionately.
But a ruling declared such rate reductions must be considered temporary, and apply only to a single year.
The new bill clarifies that any such changes would remain in effect until another rate change is triggered.
"The revenue reduction would only affect general fund collections due to the school aid earmark formula effectively holding the School Aid Fund harmless from any rate reduction," according to the legislative analysis of the bill.
