Michigan House votes to cut income taxes as Senate eyes targeted relief

• Michigan’s Republican-led House votes to reduce the state’s flat income tax from 4.25% to 4.05%
• Critics contend the cut will mean little for the working poor but a windfall for the wealthy
• Senate Democrats are instead pushing a suite of subsidies aimed at helping working families

LANSING — Michigan’s divided Legislature is pitching two diverging visions for tax cuts, with the Republican-led House approving a broad income tax cut while Senate Democrats propose expanded subsidies for child care and new mothers.

The state House on Tuesday voted to cut Michigan’s flat income tax from 4.25% to 4.05%, with seven Democrats joining majority Republicans in the 65-43 vote.

“Our state doesn’t need more revenue, it needs less government,” said Rep. Bryan Posthumus, R-Cannon Township, who argued Michigan should join states like Florida that have no income tax but do tax other sectors of the economy to fund government services. 

The proposal would represent a less than 5% decrease in the overall tax bill for most Michiganders and could save the median Michigan household — which earned $71,149 in 2023 — about $131 a year. 

The nonpartisan House Fiscal Agency estimates the cut would reduce state revenue by more than $700 million a year, a decline that some lawmakers warned could be too steep. 

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Rep. Morgan Foreman, D-Ann Arbor, called the legislation “a wolf in sheep’s clothing” that would disproportionately benefit the wealthy. Because the state taxes income at a flat rate, she estimated 64% of the projected savings would go to the wealthiest 20% of Michiganders. 

Foreman and other Democrats, like Rep. Jasper Martus of Flushing, have advocated for amending the state constitution to establish a graduated income tax, taxing higher levels of income at a higher rate. 

Martus called the income tax cut bill “a gimmick” and raised the specter of federal funding cuts in his opposition to the legislation.

“Forty percent of the Michigan budget is federal funding,” Martus said, alluding to proposed funding freezes and reductions under President Donald Trump. “God forbid that those cuts occur, we're gonna have to find the revenue somewhere, and it’s going to be hard to find.”

Targeted relief

While Republicans celebrated passage of the income tax cut plan, the measure is unlikely to see a vote in the Senate, where Democrats hold a one-seat majority and have introduced a competing plan for targeted tax relief. 

As part of a suite of proposals they’re calling “Building Blocks,” Senate Democrats want to expand the Rx Kids program, which began in Flint and provides direct cash payments to pregnant women and mothers with newborns.

They also want to provide low-income working families with a $5,000 tax credit and make Michigan’s “Tri-Share” child care subsidies permanent. 

“We're still up against a system that has ignored the financial struggles of parents, instead prioritizing the needs of billionaires and big corporations,” Sen. Mallory McMorrow, D-Royal Oak, said last week.

Rep. Kathy Schmaltz, a Jackson Republican who sponsored the House income tax plan, noted she is also preparing child care legislation that would include measures like tax-advantaged bank accounts and credits on child care supplies. 

“​​Any tax cut is good right now, especially with all the affordability issues,” Schmaltz said, emphasizing that her legislation would benefit everyone, and not just families under a certain income threshold. 

Michigan’s income tax was reduced to 4.05% in 2023, when a glut of pandemic-era government revenue triggered an automatic reduction that had been written into a 2015 road funding law.

Republicans contend that cut should have been permanent, but a unanimous Court of Appeals ruling limited it to one year. Michigan returned to a 4.25% tax rate in 2024, which the GOP-led House is now trying again to permanently reduce. 

What’s next

The competing tax cut plans are the latest divergence between the two chambers, which will have to compromise on a new state budget by October to avoid a state government shutdown. 

Lawmakers also hope to come to an agreement on a multibillion-dollar road funding plan, for which Gov. Gretchen Whitmer has proposed raising taxes on business and marijuana.

The two chambers are also currently battling in court over nine bills that were approved in December but never sent to Gov. Gretchen Whitmer after the last legislative session.