House votes to repeal $80M auto insurer tax credit

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — The Michigan House, working until near midnight in a marathon session, voted late Thursday to repeal an inadvertent auto insurer tax credit, a budget-balancing move projected to save the state $80 million a year.

House Appropriations Chairman Al Pscholka, R-Stevensville, said the legislation would fix “a scandalous error.” It now heads to the Senate.

Legislators did not anticipate the credit in 2012 when they transferred administration of a program that covers medical costs of individuals injured in accidents involving uninsured drivers to a quasi-governmental entity that serves as Michigan’s insurer of last resort for motorists who can’t buy traditional insurance.

But doing so allowed auto insurance companies to claim a tax credit on the assigned claims of passengers and pedestrians injured by uninsured drivers, a benefit previously unavailable when the program was administered by the Secretary of State’s Office.

Auto insurers fought to keep the tax credit, saying it has helped keep premiums down and arguing repeal would amount to a $40 per-car tax on auto insurance customers.

Pscholka disagreed, saying Michigan residents got “diddly” in return for the tax credit.

The repeal was expected as part of a deal designed to plug a $460 million hole in the state budget caused by lower-than-expected revenues.

Legislators hope to send a complete budget to Gov. Rick Snyder’s desk next week.