Michigan Legislature puts sales tax hike on ballot

Chad Livengood and Gary Heinlein
Detroit News Lansing Bureau

Lansing — At about 5:30 a.m. Friday, the Michigan Senate narrowly approved a proposed constitutional amendment asking voters to increase the 6 percent sales tax to 7 percent during the May general election.

The Senate's action followed approval of an 11-bill package that will pump $1.2 billion more annually into road repairs and provide public education with an extra $300 million annually if voters approve the sales tax increase. The Senate vote was 26-12, just barely getting the required two-thirds support for a constitutional amendment to be sent to voters.

More than three hours earlier, in the middle of the night, the House approved the sales tax ballot proposal and the package of road funding bills that Gov. Rick Snyder and legislative leaders unveiled mid-day Thursday.

The Legislature's action capped a whirlwind 18-hour final day of the session that ended at 6:18 a.m. Friday morning.

"A lot was done in a very short period of time," Snyder said after the Senate vote.

The House approved the ballot proposal by an overwhelming 94-16 vote, sending the centerpiece of the road funding package over to the Senate.

After taking three hours to pass the 11-bill package, the Senate got bogged down in a stalemate over getting the required two-thirds majority to approve the sales tax ballot proposal. An initial vote on the sales tax proposal failed when Senate leaders came up one vote short of the two-thirds threshold.

Sen. Coleman Young, D-Detroit, joined 11 Republicans in voting "no" on the sales tax proposal. Young said the Legislature "punted" to voters instead of solving the state's road funding shortfall themselves.

"It's not leadership," Young said. "That's political cowardice, plain and simple."

Lawmakers worked through the night to pass the road funding package that raises nearly $1.2 billion more for roads while doling out increased funding for public education, mass transit and providing tax relief for low-income residents to offset the sales tax hike.

The House began voting at about 12:40 a.m. Friday on the funding package that Snyder and legislative leaders unveiled mid-day Thursday. They wrapped up at about 2 a.m., but no representatives stood on the House floor to state their reasons for voting for or against the bills.

Rep. Tom McMillin, R-Rochester Hills, complained that Republican leaders would not recognize him to speak. He compared their treatment to that of former Democratic Speaker Andy Dillon during his first term in office.

McMillin said the Legislature should re-prioritize other spending in the state's $52 billion budget instead of raising taxes.

"We don't need to do this," he said.

The House also passed a two bills strengthening the collection of sales taxes on Internet purchases from retailers with a physical presence in Michigan. Those Senate bills are not part of the roads package, but could generate $60 million in additional revenue.

"I think it's part of the equation, too, because that's money that should be going into the (state's) coffers," said Sen. Mike Kowall, R-White Lake Township. "It's tax evasion, no matter how you look at it."

A 1-percentage-point sales tax increase would generate an estimated $1.34 billion in new revenue for the complex road funding plan.

In an analysis, the House Fiscal Agency calculated the package as having a net "impact" or cost of nearly $1.7 billion. The revenue would be divvied up with $1.165 billion going for road and bridge repairs; $130 million for transit; $95 million for municipalities; and $300 million for public schools.

On a 78-32 vote, the House approved restoring the Earned Income Tax Credit to pre-2011 levels. The GOP majority slashed the tax credit in 2011 to help balance the state budget.

But restoration of the tax credit to provide tax relief for low-income residents was a stipulation Democrats made in exchange for their votes on the road funding package and sales tax ballot proposal. The state credit will rise from 6 percent of the federal Earned Income Tax Credit to 20 percent of the federal credit.

The bill calls for restoration of the credit for the 2016 tax year, meaning low-income families won't be able to claim the credit until the 2017 tax season. It's expected to deplete the state's coffers by $260 million, according to the non-partisan House Fiscal Agency.

Rep. Jon Bumstead, R-Newaygo, voted against all but two of the bills and cast a "no" vote in opposition to the sales tax ballot proposal. He opposed the added spending on education and restoring tax credits for the poor.

"There's a lot of extra spending to get votes," Bumstead said of the package of bills. "(Education funding) has nothing to do with roads."

The GOP-controlled House voted 88-22 on a conference committee report to remove the sales tax on gasoline. Four Democrats joined 18 Republicans in rejecting the compromise legislation, which swaps the sales tax for a new wholesale gas tax.

House members approved the wholesale gas tax plan forged by the conference committee late Thursday night on a 93-17 vote.

Two bills requiring competitive bidding on certain road construction projects soared out of the House on near-unanimous votes of 108-2 and 107-3.

The package of bills tied to road funding included education funding legislation Democrats secured in negotiations.

Snyder remained in his Capitol office throughout the overnight session.

Just before midnight, Snyder and his transportation director, Kirk Steudle, were in the Capitol rotunda listening to a dozen House members sing Christmas carols, led by Rep. Ed McBroom playing piano.

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