Michigan Approves Bill That Cuts Corporate Taxes By $1.7 Billion, Raises Taxes On Low-Income Families

Gov. Rick Snyder (R-MI)

Conservatives in several states, as we’ve been documenting, have moved in recent months to reduce their state corporate taxes at the same time that they’ve proposed raising taxes on low-income families and cutting services upon which their most vulnerable citizens depend. Last week, Gov. Rick Scott (R-FL) lost his fight to eliminate Florida’s corporate income tax, in the highest-profile defeat the corporate tax-cutters have suffered yet.

However, Gov. Rick Snyder (R-MI) has been far more successful in getting his tax package through. Yesterday, in fact, the Michigan legislature approved Snyder’s plan, with some slight modifications, by narrow margins in both the state House and state Senate:

For months, Governor Rick Snyder has been trying desperately to enact massive business tax cuts paid for with new taxes on pension income and the elimination of the Earned Income Tax Credit (EITC). Unfortunately, a modified version of Snyder’s plan passed both houses of the state legislature yesterday and is now on its way to the Governor’s desk, where it will soon be signed into law…In the end, the most notable change to occur in the Senate was the reintroduction of the EITC, set at a level equal to 6 percent of the federal credit. Given that Michigan’s current EITC is equal to 20 percent of the federal credit, this change will still result in a steep tax hike on low-income families.

This amounts to an 86 percent cut in the state’s corporate income tax, exempting nearly 100,000 businesses from paying any corporate income tax at all, combined with a two-thirds reduction in the state’s Earned Income Tax Credit (which goes to benefit low-income families). (Snyder originally wanted to eliminate the state’s EITC entirely.) As state Sen. Rebekah Warren (D) said, the plan represents a “significant tax shift” from business to those “who are the least among us.”

Adding insult to injury, there’s little guarantee that Snyder’s corporate tax cut will lead to job creation. Snyder himself confessed that “I can’t guarantee results.” State Sen. Jack Brandenburg (R) added that “there’s no guarantee that the tax cuts for businesses will generate a lot more jobs.” “The results are likely to be very disappointing,” said Timothy Bartik, senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan.