Bills sent to Snyder speed tax cut for car trade-ins

David Eggert
Associated Press

Lansing — Bills sent to Gov. Rick Snyder on Thursday would accelerate a tax cut for people who trade in their vehicle when buying a new one in Michigan.

A law enacted in 2013 lets those who purchase a car or recreational vehicle subtract the value of their trade-in from the sales price of a new one for tax purposes. The legislation finalized by the Republican-led Senate would more quickly phase in how much of the trade-in value can be deducted.

The credit now is $3,500 — saving people up to $210 in taxes — and rises $500 annually until 2039, at which point there will be no limit on the trade-in value excluded from taxation. The bills would speed the phase-in of the tax break for car purchases to 2029, 10 years sooner. The trade-in credit would jump to $5,000 in 2019 and increase by $1,000 each year after.

Michigan has a 6 percent sales tax.

The bills’ supporters — which include General Motors, auto dealers, bankers and other business groups — say the “sales tax on the difference” law helped boost auto sales and buyers deserve a fully phased-in tax reduction earlier. Opponents include school districts, local governments and public-sector workers who worry about a further erosion of the tax base.

The nonpartisan House Fiscal Agency says the state would lose an extra $2.1 million in the 2018-19 fiscal year, $5.1 million in 2019-20 and $7.5 million in 2020-21 — mostly in the $14 billion-plus fund that pays for K-12 schools. The overall tax cut could total $300 million over a number of years.

“The governor will review the final version of the bills when they are sent over and then make a decision,” spokesman Ari Adler said.



Senate Bills 94-95: