CREC: Lower Income Tax Rate + Higher Retirement, EITC Exemptions = Lower Revenues

Article courtesy MIRS News for SBAM’s Lansing Watchdog e-newsletter

Lawmakers will have roughly $989 million fewer dollars to spend in the state’s General Fund and $105 million more in the state’s school aid fund in 2023, according to new estimates agreed to Friday morning by the Consensus Revenue Estimating Conference (CREC). 

For 2024, General Fund revenue estimates were revised downward by $1.85 billion while School Aid Fund revenue was increased by $42 million.

The officials involved in the projections pointed to the .2 percentage-point cut in the income tax, the retirement income changes and the Earned Income Tax Credit expansion as one of the driving factors in the lower revenue estimates.

That income tax rate change to 4.05% is slated to cost the state $482.2 million in Fiscal Year 2023 and $218.7 million in Fiscal Year 2024.  The looming Earned Income Tax Credit expansion will cost the state $768 million in 2024 and $384 million in 2025.  Changes to retirement income taxation will cost the state $281 million in 2024 and $350 million in 2025.  

“The reductions we’re seeing are because of meaningful public policy changes,” said Budget Director Chris Harkins.  Harkins told MIRS that Friday’s findings don’t alter the trajectory of budget development because the amount of change brought about by policy changes has been known for a while.  

Presentation materials from Friday morning’s Consensus Revenue Estimating Conference can be found at the links below: