House Democrats introduce plan to offer tax credits for union dues

As the Michigan Senate and Gov. Gretchen Whitmer are poised to pass the repeal of the state’s right to work law, Michigan House Democrats are pushing the party's labor agenda even further.

Last week, 33 House Democrats and Rep. Alabas Farhat, D-Dearborn, introduced House Bill 4235, which aims to offer tax credits for union dues paid in the state. Farhat is the majority vice chairman of the House Tax Committee.

According to the bill: “[A] taxpayer may claim a credit against the tax imposed under this part in an amount equal to the qualified union dues paid to a labor organization by the taxpayer during the tax year. To claim the credit under this section, the taxpayer shall, in a form and manner as prescribed by the department, provide verification of the qualified union dues claimed to have been paid during the tax year for which a credit is claimed under this section. If the credit allowed under this section exceeds the tax liability of the taxpayer for the tax year, that portion of the credit that exceeds the tax liability shall be refunded.”

If allowed to advance and signed into the law, the tax credit could be applied to all union dues paid during the 2023 year.

F. Vincent Vernuccio is a senior fellow with the Mackinac Center for Public Policy and president of the Institute for the American Worker.

“The award for worst new labor giveaway goes to House Bill 4235," Vernuccio told The Center Square. "The bill would force Michigan taxpayers to pay government union dues. The bill gives a full tax credit for government union dues to public employees. This is not to be confused with a tax deduction.

"This means that if a public employee pays $1,000 in dues, the state, courtesy of Michigan taxpayers, we'll take $1,000 off of their taxes. If they don't owe $1,000 in taxes the state will simply write them a check for the difference. No other state has gone this far and worse there's no cap on either the amount the state will pay or how much someone will get back. Unions could theoretically raise dues to $20,000 and the state would pay it."

Farhat told The Center Square a federal deduction but a tax cut for corporations but it was eliminated during the Trump administration.

HB4235 would not reinstate the federal IRS tax deduction, but would apply only to dues paid and taxes refunded in Michigan.

"This is different than a tax deduction which allows someone to deduct the amount they paid from their tax liability," Vernuccio said. "In this case, if a public employee paid $1,000 they would only get about $40 back on their taxes if it was a deduction. A far cry from the $1,000 credit they would get either as a deduction or in cold hard cash or as a refund. Marry that idea with House Bill 4234 which gives unions special privileges to engage in politics and taxpayers could find themselves funding Big Labor special interests for years to come.”

While establishing strict limits for corporate donations for political campaigns and ballot measures, HB4234 only subjects unions to criteria established for independent expenditures.

A House financial analysis has not indicated how much the proposed tax credit would cost the state in lost revenues.

According to the U.S. Bureau of Labor Statistics, 14% of Michigan employees, or approximately 590,000 workers, belonged to a union in 2022. The BLS also reported 644,000 workers, or 15.3% of Michigan workers, are represented by unions.