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5 key points from Whitmer’s State of the State address

Crain’s Detroit Business
Jan. 26, 2022
Chad Livengood

With the fall election nine months away, Gov. Gretchen Whitmer used her fourth State of the State address on Wednesday to focus on pocketbook issues amid inflationary increases in food, gas and everyday household items.

“We’re all bearing the brunt of inflation,” Whitmer said. “You see it when you buy groceries or boots for your kids.”

Whitmer’s 25-minute address at Detroit Diesel’s plant in Redford Township was not delivered before lawmakers at the state Capitol because of Michigan’s ongoing fourth major wave of new cases of COVID-19.

Here are five key proposals from the Democratic governor’s speech:

Eliminating taxes on retirement income

Whitmer called for making all retirement income from pensions and 401(k) and IRA accounts exempt from the state’s 4.25 percent individual income tax.

She said the proposal could save 500,000 families $1,000 annually in taxes.

Whitmer first called for repealing the so-called pension tax in her 2019 State of the State address, her first year as governor. The proposal went nowhere in the Republican-controlled Legislature.

“It’s time to get it done,” Whitmer said Wednesday. “Repealing the retirement tax will help real people.”

The Whitmer administration estimates the plan would amount to a $470 million reduction in taxes for retirees.

In order to spare the state budget an immediate big hit in revenue, the governor wants to phase in the exemption over four years. The first year of the proposed tax break on retirement funds would reduce state revenue by $47 million, according to the state budget office.

In 2011, then-Republican Gov. Rick Snyder and the GOP-run Legislature eliminated several income tax exemptions for pensions from public sector employers. In subsequent years, some Republican lawmakers have supported repealing the pension tax, but the measure has never gotten support from GOP leaders.

Whitmer’s proposal drew praise from her allies at the Michigan Education Association, but caution from one influential lawmaker.

“The focus is to find a way to responsibly provide relief, knowing that our current level of revenue is not sustainable with much being one-time federal funding,” said Senate Appropriations Chairman Jim Stamas, R-Midland.

Increasing tax credit for working poor

Whitmer also called for increasing the Earned Income Tax Credit for lower-income workers.

That tax credit was cut in 2011 by Snyder and fellow Republicans in the Legislature from 20 percent of the federal credit to 6 percent.

Whitmer’s proposal calls for restoring it to the 2011 level of 20 percent, or tripling the value of the current refundable tax credit.

Nearly 1 million children come from families that qualify for the tax credit and would benefit from larger refund, Whitmer said.

“We’ve done a lot of good work to lower costs, but I know families are still feeling squeezed,” the governor said. “Rolling back the retirement tax and raising the Michigan EITC will keep more money in people’s pockets, and we can ensure less comes out.”

Whitmer laid out her tax relief proposals hours after a Republican-controlled Senate committee advanced a plan Wednesday to slash the 6 percent corporate income tax and 4.25 percent individual income tax rate to 3.9 percent. They also want to create a $500-per-child tax credit. The Senate GOP plan would reduce taxes for businesses and individuals by $2.4 billion when fully implemented in the 2024 fiscal year, according to the nonpartisan Senate Fiscal Agency.

Tori Sachs, executive director of the Michigan Freedom Fund, a conservative political organization, said Whitmer should support broad-based tax relief instead of the targeted cuts she proposed Wednesday.

“This was campaign rhetoric, with no details and no plan to address the real problems the people of Michigan face every day,” Sachs said in a statement.

Reducing household costs

Whitmer called for the passage of legislation that would cap the monthly cost of insulin for diabetics at $50. She said a vial of insulin can cost about $100 and most diabetics need two or three vials each month.

“Too many Michiganders are forced to forgo insulin or ration it — putting their lives at risk,”

Whitmer’s push for state government price controls on insulin came as Attorney General Dana Nessel launched an investigation this week into how big drugmakers such as Eli Lilly & Co. set insulin prices.

Three years ago, Whitmer signed into law sweeping changes to Michigan’s auto insurance laws that include cost-controls on medical care for injured drivers that went into effect last summer. The governor used Wednesday’s speech to tout forthcoming $400 per vehicle owner refund checks from the state’s injured drivers trust fund, the Michigan Catastrophic Claims Fund, or MCCA.

In December, the MCCA’s governing board of auto insurance companies approved the refund for any driver who had car insurance in place on Oct. 31. The $400 refund checks — totaling $3 billion — are supposed to arrive in mailboxes of drivers by May 8, Whitmer said.

“Her speech tonight struck me as Clintonesque … serious proposals geared toward a large audience,” said Sandy Baruah, CEO of the Detroit Regional Chamber.

Spurring electric vehicle sales

On the heels of Tuesday’s announcement by General Motors Co. that it is investing $6.5 billion in Michigan for the manufacturing of electric vehicles and batteries, Whitmer wants state taxpayers to incentivize buying an EV.

The governor proposed a new $2,500 electric vehicle rebate for families that purchase an EV, with $2,000 going toward defraying the cost of the vehicle and $500 for installation of an in-home battery charger. The state tax incentive could be combined with the federal government’s $7,500 rebate on EVs, Whitmer said.

“If we get this done, we can lower the cost of electric vehicles by nearly $10,000,” she said. “We can make it easier for Michiganders to go electric.”

Economic development tools

Whitmer used the speech as a victory lap of sorts for GM’s investment, which came after the Legislature created a $1 billion tax incentives fund for large-scale economic development projects. GM is getting $666.1 million of the $1 billion approved by lawmakers.

The new incentives were a direct response to critics saying Michigan is unprepared to compete for big industrial projects with southern states that pay foreign automakers direct cash grants for new investment.

“The knock on Michigan was that we didn’t have the tools to compete with other states, we moved too slowly and state government was dysfunctional,” Whitmer said.

The governor heralded the GM deal as a bipartisan achievement that could be replicated on other issues facing the state.

“Yesterday, the world saw what we can accomplish together,” the governor said. “Democrats, Republicans, businesses, utilities, and labor joined forces to equip Michigan with solid economic tools to attract big projects and create thousands of jobs.”

In response to the speech, a Michigan Republican Party spokesman said the “state of our state is fragile and the blame falls solely on Gretchen Whitmer.”

“Our economic development strategy is dysfunctional at best and our unemployment remains the highest in the Midwest,” Gustavo Portela, communications director for the state GOP, said in a statement.

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