LANSING – More income tax filers would be eligible for the state’s Homestead Property Tax Credit and their credits would rise under a proposal unveiled Wednesday by Governor Rick Snyder, although the credit will still go to fewer people than those eligible prior to enactment of Snyder’s 2011 tax plan.

Snyder completely departed from the proposals under consideration in the Legislature that would reduce the income tax rate from its current 4.25 percent to as low as 3.9 percent, rebuffed the idea of boosting the state’s Earned Income Tax Credit and decided against increasing the personal exemption.

Instead, he followed through on his State of the State pledge to concentrate income tax relief to lower- and middle-income residents.

The proposal is complex and designed to give eligible taxpayers some immediate relief by applying the changes to the 2013 tax year. The average annual savings is estimated at $74 per person. Those not currently eligible would see the biggest change in their tax treatment.

“This is an opportunity to say we can give immediate relief, relatively immediate relief, without waiting for the next budget year,” Snyder said. “The sooner we can help people, hard-working taxpayers that may have concerns about their bills, the better off this is.”

Under the proposal, the income eligibility threshold to qualify for the tax credit would rise from $50,000 to $60,000. That will expand eligibility to between 200,000 to 250,000 people, Snyder said.

Additionally, the formula for calculating the credit would change to make it more generous. Currently, taxpayers subtract an amount equal to 3.5 percent of their income from the amount of property taxes on their home and then multiplying that result by 60 percent.

Under the changes, taxpayers would instead subtract just 3 percent of their income in that same formula. The proposed change would affect 1.3 million taxpayers, Snyder said.

In the first year, the cost of the program would be more than $200 million because it is retroactive to 2013. Going forward, it will cost $102.7 million.

Those already eligible for the credit will not need to do anything different when filing their taxes this year, Lt. Governor Brian Calley said. Those who will become newly eligible will have to file a credit claim form later this year, he said.

But while the proposal would expand the Homestead Property Tax Credit, it will still fall short of what it was before Snyder curbed it in 2011 as part of how he paid for slashing taxes on businesses. Prior to that law, taxpayers with incomes up to $82,650 qualified for the credit.

Democrats had urged Mr. Snyder to restore the Earned Income Tax Credit, which prior to the 2011 tax changes was equal to 20 percent of a filer’s federal EITC but is now 6 percent. Snyder said a federal government report found that 21 percent to 25 percent of EITC payments at the federal level were improper.

Given that, and that the state uses the federal EITC to calculate its EITC, “To use that as a mechanism I just didn’t deem appropriate,” Snyder said.

As to rolling back the income tax rate (SB 402 , HB 5265 , HB 5266 , HB 5267 ), Mr. Snyder said reducing the rate would mostly benefit higher-wage taxpayers. More than half the benefits would go to those making more than $100,000, Snyder said. His plan concentrates relief to those making $60,000 or less.

“I thought we should focus in on lower and middle income people, wage earners that are working hard in particular,” he said.

Sen. Jack Brandenburg (R-Harrison Township), the Senate Finance Committee chair and sponsor of SB 402, said he thought Snyder’s proposal was light. A better plan would cut taxes by $175 million to $200 million, he said.

“It’s obvious there’s a disagreement there,” he said. “We’ve got roughly two and a half months to work through it.”

Brandenburg said he would not be “bull-headed” and said there are multiple options.

Still, he said rolling back the rate benefits all taxpayers.

“But I want the money to go back equitably and I want it to go where it’s meaningful,” he said. “I think the rate reduction best achieves that.”

Sen. John Proos (R-St. Joseph) said both plans have merit, and he expected other ideas would come up for consideration as well.

Rep. Mike McCready (R-Bloomfield Hills) said Snyder’s plan sounds positive, but he wants to review the details. He said it might make sense not to make it retroactive to 2013, that way the state could put more into the Budget Stabilization Fund and help local governments with their road budgets.

“Their budgets are shot with this winter we’re having,” he said.

Rep. Joe Haveman (R-Holland), the House Appropriations Committee chair, praised the proposal. He has voiced reticence about rolling back the income tax rate.

“We’ve looked at a lot of different ideas, ideas have been kicked around,” he said. “I like the fact that is something that is easily implement, you’re filing one more form, and it’s going to be an automatic thing. I like the amount, $100 million is not insignificant, and I like the fact it’s targeted toward people making $60,000 or below. … Overall I’m pleased with what I see.”

Rep. Rashida Tlaib (D-Detroit), minority vice chair of the House Appropriations Committee, said while the proposal would help, it falls short.

“It’s not a full restoration. I would have loved to see more credits back to families. Especially those that are single parent homes, those that maybe have a couple of jobs, like the Earned Income Tax Credit, I would have loved to hear about the child tax credit and so forth,” she said. “This homestead credit, great. It’s going to help some of the seniors (where) we taxed their pensions. … I don’t think it goes far enough.”

Sen. Steve Bieda (D-Warren), minority vice chair of the Senate Finance Committee, praised Snyder’s proposal, although he noted it would not restore everyone who lost eligibility in the 2011 tax changes.

“I think this is one way to get to help a group of people out that are a little hard-pinched in this economy,” he said. “We still get a lot of calls from people who are very frustrated with what they did.”

Sen. Roger Kahn (R-Saginaw Township), chair of the Senate Appropriations Committee, said of the tax relief proposals by the governor, “We have different thoughts.”

Kahn said he prefers the House proposal (which would stop reductions in the income tax rate if revenues fall to a certain level) to Brandenburg’s, but he doesn’t like either of them, even though he supports giving money back to the people. Instead, he’d rather see something like a rebate or a triggered increase in the personal deduction for dependents, he said.

Kahn said the problem with the tax relief proposals, including Snyder’s proposal on the Homestead Property Tax Credit, is they lack flexibility. He said the Homestead Property Tax Credit, by its nature, is an ongoing expenditure, and therefore lacks the flexibility he seeks.

He said the concept behind the proposal assumes the state’s economy has continued growth, but having lost 800,000 jobs during the previous decade and only getting 200,000 back, “it’s a weak recovery.”

“So counting on continued growth in the state of Michigan, that’s all right, but you ought to hedge your bet a little bit,” he said. “I think that’s only reasonable, so that if things don’t turn out the way we all want them to go but you still have some safety in your budget.”

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