The Michigan House just adjourned session for the day (Tuesday) after adopting a substitute version H-3 for HB 4001 that would reduce the income tax rate from 4.25% down to 3.9% by January 1, 2021 and stopping at that point. Following hours of caucus and floor discussion, the new version was introduced and adopted on the House floor with no explanation of the new version. The House Fiscal Agency analysis of the new proposal pegs the state’s General Fund loss in the first year and $195 million and progressing upwards to $1.1 billion in FY2021-22. The H-3 version of the bill is now on 3rd reading in the House and has been listed for action on TODAY’s (Wednesday’s) House calendar. So it is just as important to contact your Reps today and ask them to oppose the sub version of HB 4001. Governor Snyder came out with a statement last night opposed to the revised bill (he was also against the original bill).
Legislation being considered in Lansing would eliminate the state income tax, potentially blowing a massive hole in our budget and destroying vital programs and services communities and your residents rely on every day. Let’s face it, nobody likes to pay taxes. But we need the services those taxes support – police and fire protection, road maintenance, street lighting, drinking water, libraries, parks, and the list goes on and on.
This plan to eliminate the state income tax is moving quickly and we need your help to oppose it. On Feb. 15, a state House committee passed out HB 4001, which would cut $680 million from the state budget in the first, partial year alone. This idea is poor fiscal policy that would harm the state’s future ability to provide critical services for its residents, communities, and businesses. There is no question that with revenue reductions of that magnitude, the remaining statutory revenue sharing payments would be at risk and any future restoration of the cuts from the past decade would be a virtual impossibility.
Proponents of the tax cut say it would spur economic growth and allow people living paycheck to paycheck to see meaningful tax relief and allow them to buy more. A recent Midland Daily News editorial disagreed and broke it down like this: “But the reality is that is a bunch of bunk. A person making $50,000 a year would see a tax cut of $175 — about $3.37 per week (48 cents a day). That’s hardly going to bail out people living paycheck to paycheck and is a very minimal increase in buying power.”
Governor Snyder and Michigan Treasurer Nick Khouri also have spoken against the proposal and recent polling reveals little support for an income tax cut from voters, regardless of political party or geography, and almost no support once voters are told of the impact of the repeal. The poll found 74 percent of people oppose the idea of eliminating the income tax without a plan to replace revenue lost by the state.
Michigan communities have already lost $7.5 billion in revenue sharing dollars since 2002. This is money that should have gone to local communities, but instead state leaders kept the funds for their own budget priorities. Further risking cuts in revenue sharing, coupled with the dramatic declines in property tax revenues from the Great Recession, will only further devastate local governments. We should be talking about growth, not more cuts. With Michigan’s economy finally recovering, we should be looking for ways where our communities can share in that recovery, not push them further into crisis.
Matt Bach is director of media relations. He can be reached at email@example.com.