State Rep. David Martin today introduced a plan that would spur economic growth and offer relief to people throughout Michigan by cutting the state income tax for families and small businesses.
The state income tax rate increased from 4.05% to 4.25% on Jan. 1, 2024, after Lansing Democrats took action to end the reduction that occurred in 2023, thanks to a law enacted by Republicans in 2015. Martin’s plan would immediately reduce the state income tax rate back down, lowering it even further to 3.9% to help families who are struggling to keep up with the high cost of living.
“Lowering Michigan’s income tax to 3.9% is a step toward a brighter future for our state,” said Martin, R-Davison. “It’s about giving families a break while boosting our state economy. Jobs are flourishing where taxes are under 4%, and that’s where we should aim to be. My plan will give struggling families some breathing room and fuel Michigan’s growth.”
Martin’s proposal would also follow through on a previous promise to restore the rate to 3.9 percent after it was raised during Gov. Jennifer Granholm’s administration.
In 2007, as part of a legislative deal to avoid a government shutdown, then-Gov. Granholm and state lawmakers agreed to temporarily increase the state income tax rate from 3.9% to 4.35%. The pledge at the time was for the tax rate to fall back to 3.9% by 2015, but it never happened. The state income tax rate was later reduced to 4.25% in 2012 and temporarily dipped to 4.05% in 2023, but Lansing Democrats successfully pushed for taxes to go back up in 2024.
According to data compiled by the Mackinac Center for Public Policy, jobs in states that tax income at less than 4% are up 5.7% above their pre-pandemic levels. In states that tax income at 4% or higher, job numbers have only increased by about 2% since the pandemic. Michigan is even further behind, with the state still 0.6% below its pre-pandemic job numbers, according to the latest payroll jobs data from the Bureau of Labor Statistics.
“Reducing the income tax should be seen as an investment in Michigan’s workforce,” Martin said. “Lower taxes mean more spending power for families, circulating money back into our local businesses and fueling job creation. It also attracts businesses looking for a friendly environment, spurring job creation and setting the stage for sustained economic growth.”
State budget experts on Friday announced higher-than-expected revenue coming into the state, news Martin said confirms that the state can afford to sustain a tax cut. Despite increased revenue and evidence that lower taxes would spur job growth, Gov. Whitmer continues to push for higher taxes, using her population council to make the case.
Martin’s plan, House Bill 5399, was referred to the House Government Operations Committee.
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