A pro-teacher, pro-union lawmaker wants to raise the state’s 6% corporate income tax to 10% to spend billions more on public schools while slashing corporate subsidies.
The proposal, which would raise the tax by 66%, aims to use the additional CIT revenue to make “historic investments” in public schools. According to the bill’s author, Rep. Dylan Wegela (D-Garden City), the extra money could give teachers an estimated $20,000-a-year raise.
Colleagues nixed Wegela’s invitation to attend a press conference at his office, but Rep. Emily E. Dievendorf (D-Lansing) did co-sponsor the bill, HB 6105, which was introduced on the House of Representatives floor last week.
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Wegela’s plan would raise the CIT to 10% while also doing away with “corporate handouts through the SOAR fund,” referring to the Governor’s Strategic Outreach and Attraction Reserve Fund.
The legislation earmarks the first $1.2 billion of CIT tax revenue to the General Fund. The next $50 million would still go to the Housing Fund. Everything else would go to the School Aid Fund.
Wegela wants to eliminate $500 million for SOAR and direct more than $2.4 billion to the School Aid Fund.
The proposal amounts to a 67% increase in the CIT, according to Michigan Chamber of Commerce spokesperson Sara Wurfel as reported by MIRS.
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The Michigan Chamber strongly opposes the tax hike, noting an increase in business taxes sends the wrong signal to Michigan’s business community.
“This reckless and misguided proposal poses a risk to Michigan’s employers and their ability to create and sustain jobs, which ultimately harms workers and communities alike too,” Wurfel said in the MIRS article. “Michigan has already fallen behind compared to surrounding states as they continue to develop more competitive tax policy.”
Currently, the first $1.2 billion of CIT tax revenue goes to the General Fund. After that, $50 million goes to the Community Development and Housing Fund. The next $50 million goes into the Revitalization and Placement Fund and the next $500 million goes to the SOAR Fund. All additional money goes to the General Fund.
Wegela, a former teacher and union organizer who was reelected in November, has been an outspoken critic of state incentives for economic development. Wegela believes the higher CIT would generate $2.4 billion more for schools, which could be used to boost teachers’ salaries.
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“Here in Michigan, our starting teacher salaries are 41st in the nation at $40,302 and we have education funding in the bottom 50% of states,” Wegela said in a press release. “Today we present a new vision – one that raises taxes on the wealthy and directs our tax money to the public good.”
Meanwhile, Gov. Gretchen Whitmer signed a $23 billion budget bill into law this summer.
In addition, the state’s SOAR fund has been a key funding mechanism of Gov. Gretchen Whitmer’s “Make it in Michigan” agenda. The SOAR fund incentivizes economic development by providing financial incentives to businesses to relocate to, or expand in Michigan. Enacted in December 2021, the SOAR Fund comprises the Critical Industry Program (CIP) and the Strategic Site Readiness Program (SSRP).
SOAR faces uncertainty with future funding and a potential rebrand as the Make in in Michigan Fund. A proposed legislative package aims to transform the SOAR Fund with substantial appropriations, yet it has met resistance from Republican lawmakers.
The Consensus Revenue Estimating Conference estimated the CIT bringing in $2.2 billion in Fiscal Year (FY) 2024. Collection numbers reported by the House Fiscal Agency for September, the last month of the fiscal year, had CIT revenue coming in at $2.117 billion.