By Alyssa Burr, mlive.com (via TNS).
State treasury officials estimate Michigan government will see a $9.2 billion surplus at the end of this fiscal year, increasing the likelihood that all that cash could trigger a permanent cut in the state income tax.
The announcement came after the Consensus Revenue Estimating conference Friday in Lansing. The projections, which include forecasting from the Senate and House fiscal agencies and Department of Treasury, estimate Michigan will bring in $32.4 billion in revenue for 2022-2023 year, a 1.9% decline from revenue in 2021-22. Michigan’s fiscal year runs from Oct. 1-Sept. 30.
The revenue conference sets the tone for budget discussions to take place between Gov. Gretchen Whitmer’s administration and the legislature, most likely starting in February. The hefty surplus is despite a historically large, $76-billion budget bolstered by federal pandemic relief money.
The size of the surplus, as well as the likelihood of a tax cut being triggered, is of particular interest to legislative Democrats, who have begun laying out an ambitious policy agenda centered on taxes cuts and credits that could have significant impact to the state budget.
Related: Democrats say 700,000 Michigan households could save thousands under tax cut plan
Analysts’ report that state government took in a whopping 14% more money last fiscal year than in the year before — $3.9 billion increase — has set state government abuzz this week. It’s because if revenue growth outpaces inflation too aggressively it can trigger a 2015 road funding law provision that’ll lower the income tax rate. That estimate increase is enough to make it happen, with an estimated reduction to 4.05% from 4.25%.
Officials said Friday it was too early to determine if that would happen, since the books have not yet closed for the 2022 tax year.
“We understand that this law requires us to look at a calculation, however, the financial statements required for us to conduct that calculation are incomplete,” said state Treasurer Rachael Eubanks. “We simply don’t know what’s going to happen because the books are not closed yet.”
Gov. Gretchen Whitmer made similar remarks during a press conference Jan. 12 where she and Democratic leaders unveiled their own plan to offer tax relief for Michiganders. When pressed if she would consider amending the 2015 law that would prompt the trigger, Whitmer said there was “a lot of work that has yet to be done.”
“I’m not going to speculate on what may or may not happen yet,” she said.
The state’s rosy financial position was contrasted by a relatively dour economic outlook presented by the analysts Friday. Global concern that a recession may be looming has grown in recent months and that extended to Michigan in the presentation.
“As the economy moves into this next chapter, we need to be cautious and deliberative in our policy choices,” Eubanks said.
With the new budget estimates in place, Democrats in the new majority will be looking at a laundry list of items focused on providing residents in relief from inflation, said Senate Appropriations Committee Chair Sarah Anthony, D- Lansing.
Anthony pointed to the first bills introduced in the legislature this week – including one to repeal a state tax on retiree pensions and increasing the earned income tax credit – as a look into what specific policies may be priority but said she didn’t want to “over promise.”
“I’m always looking at kitchen table issues, particularly in the higher education areas and health care,” Anthony said. “There’s so much we can do, we just have to do it responsibly.”
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©2023 Advance Local Media LLC. Visit mlive.com. Distributed by Tribune Content Agency, LLC.
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Tags: Income Tax, State and Local Taxes, Taxes
