MI HB5685

Establishes an automatic income tax rate reduction mechanism beginning January 1, 2023 that reduces the 4.25% tax rate when general fund revenue growth exceeds inflation, with the reduction calculated based on the excess revenue above a capped baseline.

Directs state to reimburse local governmental units starting October 1, 2016 for all property tax revenue lost due to the homestead property tax exemption for disabled veterans under the General Property Tax Act.

Allocates income tax revenue to the Michigan Transportation Fund in three phases: $150 million (October 1, 2018-September 30, 2019), $325 million (October 1, 2019-September 30, 2020), and $600 million (October 1, 2020 and thereafter).

Continues existing distribution of 1.012% of gross income tax collections to the State School Aid Fund.

Defines key terms including "capped general fund/general purpose revenue" based on 2020-2021 fiscal year baseline adjusted for inflation at 1.425 times the consumer price index change.