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Former pension tax bill goes to conference committee; Republicans worry it will see major changes

Lawmakers in Lansing are negotiating what might turn into a bill to cut taxes for retirees, provide certain tax breaks, and spend money on economic incentives.

Michigan lawmakers could be setting a bill up to cut taxes for retirees, provide certain tax breaks, and spend money on economic incentives. But all that's still up in the air, and no one seems certain about what the bill will eventually become.

HB 4001 started as a bill to end tax collection on pension income for former public workers and provide tax breaks to private retirees. But it was replaced with a shell income tax bill — which means it’s mainly a placeholder for future changes — before making it out of the state Senate Wednesday.

That set it up for what’s known as a non-concurrence vote in the House, where that chamber disagrees with changes made and sends the bill to a conference committee to work out the differences.

Republicans are deriding the process.

“At this point right now, it’s gutted, and they want to go to conference and put a bunch of secret stuff in it. They want to put a bunch of secret stuff in it. We don’t exactly know all of it. They’ve developed some of it,” Rep. Sarah Lightner (R-Springport) told reporters ahead of the House vote Wednesday.

House Democrats called the conference committee process a tool the Legislature has to move policy back and forth and reach a consensus.

And Senate Appropriations Chair Sarah Anthony (D-Lansing) said she believes the more people involved the better. But negotiations still need to play out in full.

“I think it’s just one part of really early negotiations, so it doesn’t concern me right now. I think folks who are in the room know what’s happening and then others will be brought in as the process takes place,” Anthony said.

Critics say plans they’ve seen for the bill would retroactively deposit money from Michigan’s corporate income tax into a reserve meant to attract large-scale development projects, rather than the state’s general fund.

Representative Lightner said that would likely put revenue below marks needed to trigger an expected tax cut. If projections from the state’s January Consensus Revenue Estimating Conference hold, the state’s income tax rate would fall from 4.25% to 4.05% under benchmarks outlined in a 2015 law, but Lightner said redirecting the money could preempt the tax cut.

“And so, nobody will get relief. So, the working class, the seniors, families, no relief there. But we’re going to give out $600-, $700 million to a corporation to benefit one part of Michigan,” Lightner said.

Democrats are pushing back on those claims. Since the estimating conference, they’ve maintained it’s too early to act as if the income tax reduction was certain.

They’re also raising the point that HB 4001, as it currently sits ahead of conference committee, only contains minor changes.

Amber McCann is spokesperson for Democratic House leadership.

“At no time has this chamber brought up a bill, passed anything or done anything to date with regard to taking action on the 2015 statute” that lays out the conditions for income tax cuts based on increases in state revenues, she told reporters.

McCann emphasized Speaker Joe Tate’s (D-Detroit) priorities are still lowering taxes for retirees and raising the state’s earned income tax credit that provides breaks for low- and moderate-income workers.

Two Senate bills concerning retirement taxes and the earned income tax credit are currently before the House. While the Senate’s proposal for the tax credit is similar to one passed in the House last week, differences still exist between the House and Senate when it comes to handling pension taxes.