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The good news and bad news in House Bill 4001

Tax cut survives, but spending package includes $1.65B in corporate welfare and handouts.

With Democrats running the Michigan House, Senate and governor’s office, the future of a scheduled tax cut, from 4.25% to 4.05%, looked bleak.

Gov. Gretchen Whitmer and the Lansing Democrats had a plan to move $800 million into last year’s budget, so as to avoid triggering the tax cut. In lieu of that tax cut, Whitmer wanted to send $180 rebate checks.

But timing was on the side of the Republican minority. Due to a need to close the books on fiscal year 2022, there was a time crunch on the tax scheme and the rebate. If House Bill 4001 didn’t take effect by April 18, there would be no rebate checks.

In the Michigan House, “immediate effect” is determined by voice vote. Even if a bill passes by a slim majority, that voice vote carries the weight of a two-thirds vote. In the Senate, a vote tally is taken. Of the 38 senators, 26 would need to vote yes for a bill to take immediate effect.

When HB 4001 was passed in the Michigan Senate on Feb. 16, an attempt at immediate effect failed. Action on the bill was postponed for two weeks, until Feb. 28. When Democrats made a second push for immediate effect, it failed again, earning only 19 votes.

The good news about House Bill 4001 is that the tax cut was preserved. The bad news is everything else.

The bill includes $1.5 billion for corporate welfare, including the first installment of a $500 million ongoing source of revenue for the Strategic Outreach and Attraction Reserve, the SOAR Fund Michigan uses to make the handouts.

Read it for yourself: House Bill 4001 of 2023

Related reading: On House Bill 4001, Michigan Senate Republicans deny immediate effect, preserve tax cut

Whitmer wants $500 million per year for 10 years for SOAR, outside of any additional giveaways that may be deemed necessary.

There is another $150 million for politically connected donors, said David Guenthner, vice president for government affairs at the Mackinac Center.

House Bill 4001 is part of the Michigan Legislature’s 2023 spending spree. In its third month in power, the Democratic majority has spent $3 billion picking winners and losers.

Republicans have voted for every bit of it. This time, they just weren’t willing to go for immediate effect.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.