Michigan economists are feeling optimistic about the future of the state’s economy as the state is expected to bring in an extra $5 billion in tax revenue over the next two years. Our state is already projected to bring in a total of $31.5 billion in state general fund and school aid revenues this fiscal year – an estimated increase of $3 billion since the previous projection. An additional $2 billion in revenue is expected for the fiscal year 2023, bringing the state’s total surplus to around $5 billion.
It’s a welcome change from the previous two years during the pandemic, when economists feared the worst case scenario after shut-downs began due to COVID-19. “Just a few years ago, we were looking at a budget deficit. The outlook was not good,” said state budget director Chris Harkins. “Now we are in a much stronger financial position. We’ve received tremendous news today that we’re looking at $5 billion worth of additional revenues in our current and future fiscal year.” He has noted that the state economy remained in a bit of a pandemic “bubble,” waiting for consumer behaviors and economic factors – inflation, unemployment, etc. – to return to levels more closely consistent with pre-pandemic conditions.
The expected increase in revenue has driven Gov. Gretchen Whitmer to unveil new tax-relief plans, the largest tax cut proposal supported by Michigan Legislators. Some highlights from the proposal target personal income tax rates slashing them to 4 percent from 4.25 percent; issuing $500 child tax credits for families; increasing tax exemption amounts for seniors to the first $21,800, double for joint filers; and increasing the Earned Income Tax Credit, a tax break for low-income people and families, from 6% of the federal break to 20% starting this year.
With limited discussion about the plan’s contents, both the Michigan Senate and House approved the plan the same day it was formally introduced, however, Senate Republicans failed to garner enough support to ensure the passage would take immediate effect if and when signed into law, meaning that regardless of when it may be approved it won’t go into effect until the next financial year – October 1, 2023.