LANSING, Mich. — Sen. Thomas Albert said there’s a much better way to offer tax relief than the plans Democrats are moving through the Michigan Legislature.
“Tax relief absolutely should be a top priority in Michigan,” said Albert, R-Lowell. “But the approaches taken by Democrats and others are too narrow and would leave many Michiganders with no tax relief at all. Tax relief should be fair, simple and help everyone — especially in these times of economic uncertainty.”
Albert on Thursday voted against Senate Bill 3 (related to the Earned Income Tax Credit) and Senate Bill 1 (related to retirement income taxes) while advocating for plans that instead would help all Michiganders. While the EITC plan would cover about 700,000 Michigan families and the pension plan would affect roughly 500,000 households, Albert’s plan would help everyone covered by the roughly 5 million tax returns filed in the state each year.
His plan includes:
• Lowering the income tax rate from the current 4.25% to at least 4.1% or the rate that may soon kick in automatically under state law, whichever rate is lower.
• Leaving more income tax-free up front by raising the personal exemption to $10,000 for single filers or $20,000 for joint filers.
• Lowering the retirement age to 65 and doubling the amount of retirement income that can be exempted to $40,000 for single filers and $80,000 for joint filers.
Albert estimates his plan would provide at least $1.8 billion in annual ongoing tax relief —without the flaws of the other plans. Albert’s plan — offered in a substitute earlier in the week — was rejected by the Democratic majority.
Albert noted that the Internal Revenue Service says 21% to 26% of EITC claims are paid in error — likely because of the law’s complexity, which also opens the door to potential fraud. The EITC is a federal program and Michigan does not have much ability to effectively oversee the program, Albert said.
Albert said that while the EITC does help lift people out of poverty, there is little to no evidence it provides an incentive to work — in fact, it could discourage work in cases where someone would lose some of the credit’s value by working more hours.
“I wholeheartedly endorse the goals of the EITC — but there’s a better way to accomplish these same goals by simply leaving more income untaxed in the first place,” Albert said. “Increasing the personal exemption would greatly benefit lower-income workers and families.”
Albert said Democrats’ plan for retirement income is unfairly weighted toward those with government-funded pensions compared to those who receive their retirement income from private sources.
“If we are going to address retirement income, we should not show preferential treatment to a former government employee at the expense of a retired factory worker from the private sector,” Albert said. “It’s an issue of fairness — they should be treated the same.”