New plan would provide tax relief to Michigan families, small businesses

State Rep. Kathy Schmaltz today introduced a plan that would spur economic growth and offer relief to people throughout Michigan by cutting the state income tax for families and small businesses.

Schmaltz’s plan would immediately reduce the state income tax rate, which climbed from 4.05% to 4.25% on Jan. 1, 2024, after the Whitmer administration decided to end a reduction that had been triggered in 2023.

“Michigan families need a break. So many families are struggling right now just to keep up with rising costs — whether it’s groceries, gas, housing, or child care,” said Schmaltz, R-Jackson. “People need relief, and they need it now. When state government collects more money than it needs, that money should go back to the hardworking people who earned it. My plan will ensure that Michigan families and small businesses get the relief they deserve and can count on tax cuts staying in place.”

In 2015, a law was enacted to provide automatic income tax relief whenever state general fund revenues grew faster than inflation. When this provision was triggered in 2023, the tax rate dropped from 4.25% to 4.05% — a move intended to be permanent, according to the law’s architects, including former Gov. Rick Snyder, former House Speaker Kevin Cotter, and former Senate Majority Leader Arlan Meekhof. The nonpartisan House Fiscal Agency also observed at the time that the reduction would be permanent.

Despite this, the Whitmer administration and Attorney General Dana Nessel ruled that the tax cut was temporary, forcing a 5% tax hike onto everyone in Michigan.

Schmaltz’s plan, House Bill 4170, would lower the income tax rate back to 4.05% as of Jan. 1, 2025, and clarify the 2015 law so that any future automatic reductions would remain in effect unless altered through the normal legislative process.

Over the past two years, state budget experts have repeatedly announced higher-than-expected revenue coming into the state. Schmaltz said this shows the state has the money to cut taxes.

“Michigan families are making tough choices every day — stretching their paychecks, cutting back on essentials, and doing everything they can to stay afloat,” Schmaltz said. “Meanwhile, the state is taking in more money than it needs, yet still raising taxes on the very people who need relief. That’s just wrong. My plan will make sure families can focus on taking care of their loved ones, and small businesses can continue growing and creating jobs in our communities.”

Schmaltz’s plan, House Bill 4170, was referred to the House Finance Committee for consideration.

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