LANSING — Gov. Gretchen Whitmer, on Feb. 16, criticized a proposed state Senate Republican tax cut of $2.5 billion, claiming it was “not sustainable.” Whitmer made the comments during an event at Lansing Community College, where she was promoting her recent $74 billion budget proposal. She told the crowd the state needs to be able to afford any potential tax reduction, the Detroit News reported last week (https://www.detroitnews.com/story/news/politics/2022/02/16/governor-gretchen-whitmer-michigan-senate-2-billion-tax-cut-is-not-sustainable/6814438001/).

The Senate GOP plan, Senate Bill 768, passed by a party-line vote on Feb 15. It would reduce the individual income tax rate from 4.25% to 3.9% and the corporate income tax rate from 6% to 3.9%.

Whitmer’s budget plan for Fiscal Year 2023 includes funding increases for education, infrastructure and public safety. Her proposed budget seeks to take advantage of the state’s better-than-expected revenue growth throughout the pandemic by offering big funding for priority areas, as well as targeted tax cuts, reported the Michigan Advance on Feb. 16 (https://michiganadvance.com/2022/02/16/whitmer-hits-back-at-2-5b-gop-tax-cut-that-would-undermine-her-budget-plan/).

That includes a gradual end to the so-called “retirement tax,” a controversial policy signed by Gov. Rick Snyder, that taxes the pensions of Michigan’s retirees.

But on Feb.16, Senate Republicans voted unanimously against eliminating the pension tax, even though criticism of the tax has been bipartisan over the last decade, the Michigan Advance reported.

The Senate Fiscal Agency analysis states that under the Senate GOP plan, however, the bill also would increase the amount of income certain seniors could deduct by $10,000 per return for single filers, and $20,000 per return for joint returns. Seniors affected by the bill would include individuals born after 1945 and who are at least 67 years old.

According to an analysis from the nonpartisan Senate Fiscal Agency (https://legislature.mi.gov/documents/2021-2022/billanalysis/Senate/pdf/2021-SFA-0768-B.pdf), the proposals would reduce tax collections by more than $2.5 billion by the 2024 financial year.

The bill analysis states that the proposal, S.B. 768, would amend the in Income Tax Act do the following:

— Specify that the current individual income tax deductions for individuals aged 67 or over would apply until Dec. 31, 2021, and after that (i.e., beginning with the 2022 tax year), that a person who reached 67 years of age would be eligible for a deduction against all types of income of $30,000 for a single individual income tax return or $60,000 for a joint return, and require the amount of the deduction to be adjusted for inflation beginning with the 2023 tax year.

— Reduce, beginning Jan. 1, 2022, the individual income tax rate from 4.25% to 3.9%.

— Allow a taxpayer to claim, for tax years beginning on and after Jan. 1, 2022, a nonrefundable credit against the individual income tax of $500 for each qualified dependent of the taxpayer.

— Reduce, beginning Jan. 1, 2022, the corporate income tax rate from 6.0% to 3.9%.

The analysis states that the fiscal impact of the bill would:

— Reduce revenue to the General Fund and School Aid Fund (SAF) by between approximately $1.77 billion, and $1.81 billion in fiscal year (FY) 2021-22; between $2.48 billion and $2.54 billion in FY 2022-23; and between $2.55 billion and $2.61 billion in FY 2023-24.

— The revenue loss would increase in later years as the economy continues to grow and inflation raises allowable exemption rates relative to current law. The bill would affect revenue in four ways:

— It would lower the tax rate levied under the individual income tax (and flow-through entity tax, which mirrors the individual income tax).

— It would lower the tax rate levied under the corporate income tax.

— it would create a new nonrefundable credit for qualified dependents.

— It would increase the amount of income certain seniors could deduct from their income.

The fiscal impact of the bill, states the nonpartisan Senate Fiscal Agency, would be as follows:

The bill would reduce revenue to the General Fund and School Aid Fund (SAF) by between approximately $1.77 billion and $1.81 billion in fiscal year (FY) 2021-22, between $2.48 billion and $2.54 billion in FY 2022-23, and between $2.55 billion and $2.61 billion in FY 2023-24. The revenue loss would increase in later years as the economy continues to grow and inflation raises allowable exemption rates relative to current law.