New Michigan plan would cut retirement tax, offer inflation relief to taxpayers

Plan includes increased tax credits, inflation relief checks

Michigan Gov. Gretchen Whitmer is interviewed by The Associated Press in her office, Thursday, Nov. 17, 2022, in Lansing, Mich. (AP Photo/Carlos Osorio) (Carlos Osorio, Copyright 2022 The Associated Press. All rights reserved)

Michigan’s Democratic governor and legislative leaders are proposing a plan to cut retirement tax and provide relief to Michiganders amid high inflation.

On Friday, Feb. 3. Gov. Gretchen Whitmer, Senate Majority Leader Winnie Brinks and House Speaker Joe Tate announced the Lowering MI Costs plan designed to help put money into the pockets of Michiganders “immediately.” The plan will “repeal the retirement tax to save 500,000 households an average of $1,000 a year, increase the Working Families Tax Credit to put an average of $3,150 back into the pockets of 700,000 Michiganders, and deliver inflation relief checks to all Michigan taxpayers,” Friday’s release said.

In a news conference Monday, Whitmer said she and lawmakers have long been discussing ways to help cut costs for Michigan residents, and they’ve settled on a plan that helps all tax filers and immediately. If the legislation is passed, it will kick in retroactively -- meaning the tax changes would benefit people this year, Whitmer said.

“This is how we give people who really need it real relief right now, and fast,” Whitmer said.

In addition to tax changes, the plan would deliver individual inflation relief checks of $180 to every tax filer in Michigan. Officials said Monday that the $180 may not seem like much, but for those working full time and still struggling, it will work in conjunction with the tax credit increase to provide more significant relief.

The checks will be sent out “as soon as possible,” Whitmer said Monday.

The Lowering MI Costs plan still has to pass through the Michigan House and Senate before it can take effect. With a Democratic majority in the state Legislature and executive branch for the first time in decades, Michigan lawmakers on the left have more opportunities to push through and pass legislation.

Still, Whitmer, Brinks and Tate all maintained Monday that they expect bipartisan support for this plan. Speaker Tate said Republican state lawmakers have proposed similar plans, so is confident those on the other side of the aisle will help push these objectives through.

Lawmakers are set to return to the Legislature on Tuesday. Gov. Whitmer is supposed to present her budget to legislators on Wednesday.

Below are specific details for each part of the plan, as written by Gov. Whitmer’s office:

Retirement tax

The plan phases out the retirement tax over four years and ultimately puts an average of $1,000 back in the pockets of 500,000 households. Lowering MI Costs will equalize the exemption on both public and private pensions.

Working families tax credit

The plan quintuples the Michigan Working Families Tax Credit match of the federal Earned Income Tax Credit (EITC) to 30%, up from 6%. It delivers an average combined tax refund of $3,150 to 700,000 families, directly impacting nearly one million kids—almost half the kids in Michigan. Lowering MI Costs makes this boost retroactive for tax year 2022, meaning families will get more money in their pockets this year.

Inflation relief checks

The plan will deliver $180 inflation relief checks to every Michigan tax filer, providing immediate relief by putting money back in pockets. Ensures everyone receives some relief and builds on relief for working families and seniors.

You can watch Whitmer’s entire Feb. 6 news conference below.

About the Author:

Cassidy Johncox is a senior digital news editor covering stories across the spectrum, with a special focus on politics and community issues.