This week, the House of Representatives approved legislation reducing Michigan’s income tax rate from 4.25% to 4.05%, effective January 1, 2025.
Key Points:
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- House Bill 4170 was introduced by Representative Kathy Schmaltz (R-Jackson).
- According to the nonpartisan House Fiscal Agency, the new tax rate would reduce state revenue by $539.3 million in the current fiscal year.
- Barring future legislative action, the reduction would be permanent.
Background:
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- In 2015, legislation was signed into law by then-Governor Rick Snyder requiring a reduction to the income tax whenever state general fund revenues grow faster than inflation.
- This provision was triggered in 2023, reducing the tax rate from 4.25% to 4.05% for only one year.
- There was a lot of contention over whether the rate reduction should have been permanent.
Next Steps:
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- The bill was referred to the Senate Finance, Insurance, and Consumer Protection Committee for consideration.
There is similar legislation in the Senate, introduced by Senator Roger Victory (R-Hudsonville), reducing the income tax rate to 3.9%. That bill remains before the Senate Finance, Insurance, and Consumer Protection Committee.
