Tax cut talks reignite among Michigan lawmakers
Lansing – Tax cut fever is heating up again in the Michigan Legislature, where Republican leaders are backing budget bills that would trim hundreds of millions in spending proposed by GOP Gov. Rick Snyder.
Snyder vocally opposed a House plan to trim Michigan’s personal income tax rate from 4.25 percent to 3.9 percent by 2021, citing budget concerns and looming funding commitments. But legislators are looking to force the policy debate through austere budget-making.
“We’re always looking to keep our budgets responsible and keep spending as low as possible,” said House GOP spokesman Gideon D’Assandro. “The people who sent House Republicans here sent them to look line-by-line and keep government efficient and effective.”
Appropriations subcommittees began to vote Tuesday on various departmental budgets, but it’s not yet clear how much they’ll trim from the executive recommendation Snyder offered last month. Additional budget bills are scheduled for debate later in the week.
Senate Appropriations Chairman Dave Hildenbrand, R-Lowell, said the upper chamber could set aside “closer to $500 million” that could be re-inserted into the budget at a later date.
“At this point, we’re just un-committing some money in case there is an agreement on tax relief, then we’d have that available,” Hildenbrand said.
Senate Majority Leader Arlan Meekhof, R-West Olive, supports scaling back the governor’s budget proposal, said a spokeswoman, who added the move would allow the Republican majority to discuss tax relief, debt payments or a larger deposit into the state’s rainy day savings fund.
Spending targets “were purposefully lowered to give the caucus an opportunity to talk about policy decisions in relation to the budget,” Amber McCann said. “Tax relief is a very real possibility.”
House Speaker Tom Leonard, R-DeWitt, pushed a tax cut plan last month that the lower chamber rejected in a 52-55 vote amid opposition from Snyder. The legislation sought to trim the rate to 3.9 percent, but included a possible freeze at 4.05 percent if the state’s rainy day fund balance was below $1 billion.
Leonard said last week he is open to further negotiations on tax relief, including a potentially smaller cut. He and other House GOP leaders have indicated they are willing to push talks through June, when legislators have sent Snyder early budgets each of the past six years.
“It’s something we’ve done in the past, and some people have appreciated, but we want to make sure we get it done correctly,” D’Assandro said. “There’s some more spending in the governor’s recommendation this year, as opposed to previous years, so there’s more stuff for us to go through.”
The new fiscal year does not start until October – making Sept. 30 the true budget deadline — but Snyder has urged legislators not to use the appropriations process as a negotiating tool for tax relief.
“We shouldn’t be negotiating one issue like that versus getting a good budget done,” Snyder said last week. “Getting a good budget done is fundamental to being financially strong as a state, but also helping our citizens.”
“Everything from our schools, to our municipalities, to our citizens benefit from us getting a budget done in June, and we’ve been a great role model for the rest of the country.”
Snyder’s budget recommendation proposes $1.16 billion in new spending compared with the current year, but $47.9 million of it comes from discretionary general funding dollars, according to the House Fiscal Agency. Most of the increases would use restricted state or federal funds.
The administration has warned legislators that their peers and predecessors have already approved tax and fee reductions set to drain state coffers by $2.1 billion over the next three years. Additionally, a new road funding law will draw revenue from the general fund, beginning with $150 million in 2019 and topping out at $600 million in 2021.
Democrats, outnumbered in each chamber, have expressed concern about the GOP strategy to scale back Snyder’s budget recommendations to allow for a potential income tax cut.
“In my opinion, Michigan has been a state where we’ve de-invested in so many things, that I’m not looking for de-investment now,” said Sen. Curtis Hertel Jr., D-Meridian Township. “If we want to give tax relief to the middle class, we can do it by actually making sure that corporations pay some part of their fair share.”
A House appropriations subcommittee began the aggressive budget push Tuesday, trimming roughly $65 million from Snyder’s general government spending proposal, including about $90 million in discretionary general fund money.
The governor wants to deposit $20 million into a statewide infrastructure fund, a push he emphasized in his State of the State address. But the House committee approved $5 million. Snyder proposed a $10 million increase for business development and community revitalization incentives; the House bill cuts $5.5 million over the current year.
Other budget bills, including a closely watched higher education plan, are set for committee consideration later in the week before a two-week legislative break.
State Rep. Yousef Rahbi, D-Ann Arbor, said he is wary of the GOP budget strategy, arguing the state could miss an opportunity to “reinvest in our communities” despite needs.
“This isn’t a reduction of funding increases, it’s cutting a slow restoration of funding,” he said. “We want to create jobs, we want to create educational opportunities, we want to build our economy, and the only way to do that is by investing in our state resources.”
But Republican advocates say a rate rollback or even long-term elimination could be a “game changer” for the state. For now, they’re trying to identifying savings in the budget that could be applied.
“Right now, I don’t think we’re anywhere except trying to prioritize what we’re going to do with it,” said state Sen. Jack Brandenburg, R-Harrison Township. “If you ask me, I know exactly what we’re going to do with it: give it back to the people.”