Michigan to sustain $883M revenue blow after tax cuts


Michigan’s revenue will be nearly $900 million less this year than forecasted in January due to new tax cuts, state officials said Friday, leaving lawmakers with less money to spend as they work toward the state’s next budget.

The new projections, released Friday at a revenue estimating conference, show that the state’s revenue will be an estimated $883 million lower this year and $1.8 billion lower than previously forecasted next fiscal year.

State Treasurer Rachel Eubanks reiterated that the state’s economy ‘continues to perform really well,’ and that the loss in revenue was as a result of intentional policy changes.

‘We’re projecting revenue growth in the coming years, even with the responsible tax relief, due to our strong economic position, thriving businesses and low unemployment,’ Eubanks told reporters after the new estimates were released.

Even with the slight dip, the state is still flush with cash. State Budget Director Chris Harkins said the state will go into the next fiscal year that begins in October with a surplus of an estimated $7.5 billion.

Democratic Gov. Gretchen Whitmer proposed a budget earlier this year totaling $79 billion, which would be the state’s highest ever, if approved. Haskins cautioned that it would need to be ‘reduced slightly’ due to the new projections.

Last week, the Michigan House passed a $80 billion budget before the Senate approved its own $79 billion budget. The two chambers will have until July 1 — a self-imposed deadline — to reach an agreement on a final budget.

Democrats will need to garner Republican support for the budget to take effect by the end of the fiscal year in October, even with a two-seat majority in both chambers. Immediate effect requires a two-thirds vote of approval in the state Senate.

An income tax rate reduction triggered earlier this year by high revenues will cost the state an estimated $647 million in revenue the next two years.

Another $600 million in revenue loss annually will come from corporate economic development efforts, with $500 million being sent to the state’s Strategic Outreach and Attraction Reserve Fund.

The fund has been used to land major economic development project — including a $3.5 billion Ford Motor Co. plant announced this spring — by offering tax incentive packages.

The new tax policies are expected to continue affecting Michigan’s revenue in the years to come. Whitmer and the Legislature approved in March a significant increase of the state’s Earned Income Tax Credit from 6% to a 30% match of the federal rate, which will cost the state $1.15 billion the next two years.


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