The Michigan House of Representatives opened their new legislative session with a provocative move to reduce Michigan's income tax rate, while failing to provide the cost-cutting measures needed to fund the tax break. The legislation, introduced by House GOP leadership on February 22, proposed to phase out the state income tax beginning in the 2017-18 fiscal years.
 

As introduced, the plan was estimated to reduce net income tax revenue by an estimated $680 million in FY 2017-18 and $1.12 billion in FY 2018-19, with continued annual reductions of roughly $400 million per year. The legislation would have had dire consequences for the overall state budget and almost assuredly would have left the higher education budget with a sizable reduction.  While proponents of the tax package cited increased government spending as a need for the individual taxpayer relief, opponents argued that the minuscule savings the bill would potentially generate should not come at the expense of valuable projects, such as roads and schools.

 

To provide perspective, the state budget--approximately $54 billion in resources--has varying sources and its distribution is governed by the Constitution. Forty percent of the $54 billion comes from the federal government and has dedicated uses; an additional 40 percent comes from restricted funds--like fees--that also must be used for specific purposes. That leaves approximately 20 percent, or $10 billion, for the portion of the state budget that is discretionary. While that figure indeed seems great, demands such as corrections ($2 billion), health and human services ($4.5 billion), and higher education ($1.2 billion) leave little surplus or room for investments in roads, infrastructure, or public safety. Over the last decade state spending of discretionary dollars increased by a mere 1.7 percent, while the Detroit Consumer Price Index increased by 12.6 percent over the same period.     
 

Intense lobbying by both sides came to a head, and in a rarely observed legislative tactic the House leadership put the controversial tax plan up for a late-night vote and watched its untimely fail on a 55-52 vote. Twelve Republican members voted no, and one Democratic member supported the measure. Locally, Representatives Jon Hoadley (D-Kalamazoo), David Maturen (R-Vicksburg), and Dave Pagel (R-Berrien,Cass) voted against the bill. Please take a moment to thank these representatives for their thoughtful consideration of the tax plan and for their no vote:
 

jon.hoadley@house.mi.gov      davidmaturen@house.mi.gov        dave.pagel@house.mi.gov