Kathleen Gray

Detroit Free Press Lansing Bureau

Senate Republicans are looking at a proposal that would repeal Michigan’s 4.25% income tax, leaving a $9-billion hole in the state’s general fund budget.

State Sen. Jack Brandenburg, R-Harrison Township, said the bill he intends to introduce next week when the Legislature reconvenes will be the starting point of a conversation on how to provide tax breaks for individuals in the state.

“I want to fully look into what seven other states are doing and how they can get by without a state income tax,” he said. “The whole thing needs to be vetted out. I’m not in a hurry, and I’m open to all suggestions.”

Florida, Texas, Wyoming, South Dakota, Nevada, Alaska and Washington currently have no state income tax.

The income tax brought in $9.37 billion in revenues into the state in fiscal year 2016, which began on Oct. 1, 2015, according to the state Department of Treasury. That represents more than 90% of the state’s general fund budget. In fiscal year 2015, the income tax generated $8.98 billion in revenues for the state.

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Brandenburg said he thinks big tax cuts will help bring people, businesses and jobs back to Michigan, reversing a pattern in which Michigan’s population has fallen or remained stagnant over the last several decades.

“Michigan is still a tough place to do business and I think the more jobs you create, it sends off a more positive image of our state,” he said. “It’s simple, the more jobs you create, the more people spend. The more people spend, the more jobs are created and there is more tax revenue for our state.”

He doesn’t have a plan for how to replace the revenue that would be lost if the tax is repealed, but wants to form a work group to look at the proposal.

“It is a big chunk of the budget. That is going to have to be vetted out and if we can’t come to a conclusion or find an answer, then we just have to forget about the idea,” Brandenburg said. “But I want it noted, there has been no individual tax relief for anyone in the last 7-8 years.”

Gov. Rick Snyder said more study needs to be done on the proposal.

"The governor is always open to new ideas and welcomes the discussion on tax reform," said Anna Heaton, spokeswoman for Snyder. "For this particular proposal, there would need to be concrete data to demonstrate that there is adequate revenue from sources besides the income tax to ensure services for residents and investing in our statewide infrastructure would not be adversely affected."

According to the Washington, D.C.-based Tax Foundation, Michigan ranks as the 39th-highest rate among the states that levy an income tax.

Scott Hagerstrom, the Michigan campaign chairman for Republican President-elect Donald Trump and a candidate for chairman of the Michigan Republican Party, said the idea is a good one that should get serious consideration.

“Sen. Jack Brandenburg is on the right track,” he said. “I’d say to Michigan families, imagine if you didn’t have to pay any state income taxes, how that would encourage more work and bring more jobs to Michigan.”

But Democrats and groups that provide social services said the suggestion was unreasonable.

“I don’t know how you would be able to fund all the critical services in the state by removing that revenue source,” said House Minority Leader Sam Singh, D-East Lansing. “To me it doesn’t make a lot of sense.”

Gilda Jacobs, president and CEO of the Michigan League for Public Policy, said cutting the income tax would benefit wealthy residents and hurt more vulnerable Michiganders.

“Cutting Michigan’s income tax will not create jobs, will not grow its economy, and will benefit the wealthiest residents in Michigan,” she said in a statement. “Our state’s tax system is already upside down because many low- and middle-income residents pay a greater share of their income than the wealthy, and an income tax cut would make this worse.”

The state’s general fund, which depends on the income tax for its revenues, pays for most functions of state government that are not education related.

Contact Kathleen Gray: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal.