The Michigan House on Tuesday, March 1st, introduced legislation to implement Governor Snyder’s proposal to implement long-overdue tax reform. House Bills 4361 and 4362, sponsored by State Representative Jud Gilbert (R-81, Algonac) incorporates changes to Michigan’s Individual Income Tax, as well as a new 6% Corporate Income Tax for business. The Michigan Chamber strongly supports this comprehensive proposal to provide fair, simple and efficient tax reform and create a business tax climate conducive to job growth. Governor Snyder’s proposal eliminates individual, company, and industry-specific tax exemptions and credits in favor of a plan to get taxpayers on more equal footing for the long-term.
Major components of the tax reform plan include:
- 6% Corporate Income Tax (CIT). Ends 36 years of double taxation of small and mid-size companies: The CIT is limited to C corporations and limited liability companies that have chosen to be taxed as C corporations for federal tax purposes. Unlike the MBT (and old SBT), partnerships, S corporations, trusts, and individuals would not be subject to the CIT. Those entities would simply continue to pay their taxes through the Individual Income Tax.
- The CIT tax base is federal taxable income.
- Honors existing commitments for tax credits made to businesses through signed agreements under the old tax structure (these commitments will be honored in companion legislation HB 4362.)
- The Small Business Alternative Rate of 1.8 % is retained.
- Eliminates all company and industry-specific tax credits and exemptions.
Individual Income Taxes
- Rate reduced and then fixed at 4.25%.
- Public and private pensions, senior dividends and interest, and political contributions are no longer subtracted from AGI. Thus, these items will now be taxable. Social Security payments would continue to be exempt.
- Freezes the personal exemption allowance at $3,700 and phases out at a certain level of income.
- Changes to the property tax credit to provide parity between taxpayers.
- Most targeted credits and exemptions would be repealed.
Please contact your state legislators today and ask them to support House Bills 4361 and 4362 to help set Michigan on a new path forward.