Snyder's revised plan calls for raising about $300 million through retiree income tax changes. Those 67 and older as of Jan. 1, 2012 would continue to get the same tax breaks they get now, while taxes would apply to some retirement income for those ages 60 to 66. Income from Social Security and military pensions would remain exempt.

The proposals are critical to Snyder's overall state budget plan for the fiscal year that starts Oct. 1. In addition to the tax changes, Snyder wants to cut education spending and make deeper reductions to many other programs to eliminate a projected budget hole of roughly $1.4 billion.

Democrats consider the plan a tax shift, giving businesses breaks at the expense of seniors and low-income families while hurting schools and other services.

AARP Michigan remains opposed to the pension tax plan, saying seniors would be hurt by other income tax revisions included in the plan and many would lose money through proposed changes to the state's homestead property tax credit. The group's president, Eric Schneidewind, said in a statement that Wednesday's vote was "disappointing, but fortunately not the final word."

Supporters of the plan say Michigan's aging population is forcing the state to re-examine its generous policies related to senior tax breaks.

"We have an aging population," said Rep. Jud Gilbert, a Republican from Algonac and chairman of the House Tax Policy Committee. "We have a work force that's been shrinking. It's the same problem they're finding at the federal level with Social Security — there's fewer workers contributing. We have the same dynamic here, and this change needs to be made sooner rather than later."

Republicans appear to be on board with Snyder's proposed changes that would cut business taxes by roughly $1 billion next fiscal year and $1.7 billion in the year after that. The Michigan Business Tax would be replaced with a 6 percent income tax applied to corporations with shareholders. Many tax exemptions would be eliminated or phased out.

A scheduled rollback of the state's personal income tax rate from its current 4.35 percent to 4.25 percent would be delayed. The state's Earned Income Tax Credit for low-income workers, which now provides an average of more than $400 per qualifying family, effectively would be replaced or modified under the House plan with a $25-per-child tax credit for low-income families. The Michigan Catholic Conference said Wednesday the move in essence preserves a portion of the EITC and is a "step in the right direction."

Lawmakers continued votes Wednesday that would cut funding for many state programs, including public schools. Those cuts may prove among the most difficult pieces of the budget plan to get through the Legislature.

The Senate deadlocked 19-19 Wednesday on its version of a school aid bill that includes an additional $170 per-student cut to K-12 schools. Republican Lt. Gov. Brian Calley broke the tie, so the measure passed. Seven Republicans joined all 12 Democrats opposing the measure.

Total cuts per student next year would be $340 under the Senate plan, including a $170 cut already in place. Snyder has proposed combined cuts of $470, including the existing $170 cut. The House plan would have varying cuts depending on what a school district now receives from the state.

Some opponents of the measure are upset because the bill calls for using some money usually reserved for K-12 schools to support community colleges and universities. Democrats say that's done so Republicans can cut business taxes.

Republicans who voted against the Senate school aid bill were Jack Brandenburg of Macomb County's Harrison Township, Mike Green of Mayville, Goeff Hansen of Hart, Dave Hildenbrand of Lowell, Rick Jones of Grand Ledge, Mike Nofs of Battle Creek and Tory Rocca of Sterling Heights.