Snyder rejects faster tax break for car trade-ins

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Republican Gov. Rick Snyder on Tuesday rejected legislation that would have accelerated a sales tax break for residents who trade in old vehicles to purchase new ones, calling the bipartisan plan “not fiscally prudent.”

The proposal would have sped up a 2013 law to gradually increase the value of a trade-in vehicle that can be exempted from sales taxes on a new car. The two-bill package was unanimously approved by the Senate in March and sent to the governor last month after 88-19 votes in the House.

But Snyder returned the bills to the Legislature without his signature on Tuesday, effectively vetoing them.

“With budget pressures from a number of areas in coming years, in particular dedication of funds to road funding, I do not believe it is appropriate to create additional financial strain by accelerating the tax relief agreed to in 2013,” the governor said in a letter to legislators.

Senate Majority Leader Arlan Meekhof, R-West Olive, is “disappointed” Snyder rejected the legislation, spokeswoman Amber McCann said in an email. “He’ll be reviewing options for how to proceed,” she wrote.

The legislation was introduced by Senate Republicans but co-sponsored by Democratic Minority Leader Jim Ananich of Flint.

Michigan motorists can claim a sales tax exemption of up to $3,500 on a new vehicle based on the value of the older car they trade in. That exemption is set to increase by $500 every year until the cap is lifted by 2039.

Legislators wanted to accelerate the phase-in, raising the maximum exemption by $1,000 a year until lifting the cap in 2029. The proposal was projected to cost the state $2.1 million in fiscal year 2019 and then increase by about $3 million per year, according to the nonpartisan House Fiscal Agency.

Compared with current law, the legislation could have cost the state about $300 million in coming decades.

The original plan called for a slower phase-in to “lessen the burden on the state’s general and school aid fund, which are paid for by Michigan taxpayers,” Snyder said in his letter to legislators.

Snyder earlier this month signed a $56.5 million budget for fiscal year 2018 after negotiating a teacher pension reform plan with GOP leaders.