EARNED INCOME TAX CREDIT; INCREASE S.B. 417:
SUMMARY OF INTRODUCED BILL
IN COMMITTEE
Senate Bill 417 (as introduced 5-5-21)
Sponsor: Senator Wayne Schmidt
CONTENT
The bill would amend the Income Tax Act to increase, from 6.0% to 10.0%, the Earned Income Tax Credit by one percentage point each tax year until the 2024 tax year.
Under the Act, a taxpayer may credit against the individual income tax an amount equal to the specified percentages of the credit the taxpayer is allowed to claim as a credit under the Federal Earned Income Tax Credit for a tax year on a return filed under the Act for the same tax year. For tax years that begin after December 31, 2011, the specified percentage is 6.0%. Under the bill, this would apply for tax years that began after December 31, 2011, and before January 1, 2021. The bill would increase the percentage as follows:
-- For the 2021 tax year: 7.0%.
-- For the 2022 tax year: 8.0%.
-- For the 2023 tax year: 9.0%.
-- For the 2024 tax year and each tax year after 2024: 10.0%.
MCL 206.272 Legislative Analyst: Jeff Mann
FISCAL IMPACT
The bill would reduce General Fund revenue, with the revenue loss increasing as the allowable percentage of the Federal Earned Income Tax increased. Credits are paid in the fiscal year ending in the year following the tax year they are earned. As a result, the bill would have no effect on fiscal year (FY) 2020-21 revenue but would reduce FY 2021-22 revenue by approximately $24.8 million, FY 2022-23 revenue by approximately $38.9 million, FY 2023-24 revenue by approximately $57.5 million and revenue in FY 2024-25 and later by approximately $76.7 million per year. The bill would not affect School Aid Fund revenue because individual income tax revenue to the School Aid Fund is based on gross collections, which exclude the revenue impact of tax credits.
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.