Michael D. LaFaive, Mackinac Center for Public Policy
State Rep. David Martin introduced legislation last week to roll back Michigan’s income tax rate from 4.25% to 3.9%. This proposal would help households deal with the soaring cost of living and spur job growth. But most importantly, the 3.9% rate would deliver on a promise made to taxpayers almost 20 years ago. Michigan taxpayers deserve a tax cut.
Gov. Jennifer Granholm wanted to raise taxes in 2007 to close a shortfall between what her administration desired to spend and the amount of money available. As part of a deal to raise the tax rate on incomes, she and the Legislature promised that the rate would start to be rolled back again (from 4.35% to 3.9%) after she was out of office, in January 2011. But her successor, Gov. Rick Snyder, allowed the rate to fall just one-tenth of one percent before scrapping future scheduled cuts.
While Snyder did change the law through proper legislative channels, he should not have changed it. This question goes to the very heart of whether we can trust our government to keep its promises. During and after the 2007 temporary tax hike debate, there were references made to Lucy pulling the football away from Charlie Brown just when he tried to kick it. Taxpayers were Charlie Brown to government’s Lucy, landing on their backs after being tricked again.
Martin’s bill would be a start to righting this wrong. Hopefully more will be done in the future. We shouldn’t hold our breath though. Gov. Whitmer told The Detroit News just days ago that tax cuts would be a non-starter in the Legislature.
Specifically, “any proposals on that front” were unlikely to advance.
Her statement against potential tax cuts is not a surprise. Whitmer and her allies in the Democratic-controlled Legislature tried last year to thwart an income tax cut that had been written into law in 2015 as part of a road funding deal. They failed to stop it but won a favorable legal ruling from Attorney General Dana Nessel that will likely lead to an income tax hike, from 4.05% to 4.25%.
Other tax hikes may be in the offing. A bill to raise cigarette taxes by nearly $400 million was introduced late last year, as was a bill to add another payroll tax. The latter legislation has been viewed as a vehicle to pay for the costs of Gov. Whitmer’s recommended paid leave mandate, which may cost Michigan taxpayers an extra $1 billion per year.
Spending interests may want tax hikes because they’ve already spent much of the state’s excess cash. The Whitmer administration and its colleagues in the legislature last year frittered away the state’s $9.1 billion surplus on handouts to big corporations ($4.1 billion) and political pork (nearly $2 billion), including money for a splash pad, cricket field and a disc golf course. As satirist Dave Barry might say, “I’m not making this up.”
All of this new and desired spending raises fair questions. For instance, would any amount of our tax dollars be enough for the Whitmer administration and legislative leaders? Had the budget grown at sustainable levels since the 2018-19 fiscal year, lawmakers would have $6.5 billion more available to them—far more than would be needed to afford to lower taxes to 3.9% with no budget shortfall.
The Martin bill deserves a fair hearing. Michigan taxpayers deserve tax relief. Lawmakers have been spending too much and spending it on the wrong things. They ought to take their attention away from how to raise taxes and toward how they can take less from Michigan residents.
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Michael LaFaive is the senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, where he has worked since 1995.
State Rep. David Martin introduced legislation last week to roll back Michigan’s income tax rate from 4.25% to 3.9%. This proposal would help households deal with the soaring cost of living and spur job growth. But most importantly, the 3.9% rate would deliver on a promise made to taxpayers almost 20 years ago. Michigan taxpayers deserve a tax cut.
Gov. Jennifer Granholm wanted to raise taxes in 2007 to close a shortfall between what her administration desired to spend and the amount of money available. As part of a deal to raise the tax rate on incomes, she and the Legislature promised that the rate would start to be rolled back again (from 4.35% to 3.9%) after she was out of office, in January 2011. But her successor, Gov. Rick Snyder, allowed the rate to fall just one-tenth of one percent before scrapping future scheduled cuts.
While Snyder did change the law through proper legislative channels, he should not have changed it. This question goes to the very heart of whether we can trust our government to keep its promises. During and after the 2007 temporary tax hike debate, there were references made to Lucy pulling the football away from Charlie Brown just when he tried to kick it. Taxpayers were Charlie Brown to government’s Lucy, landing on their backs after being tricked again.
Martin’s bill would be a start to righting this wrong. Hopefully more will be done in the future. We shouldn’t hold our breath though. Gov. Whitmer told The Detroit News just days ago that tax cuts would be a non-starter in the Legislature.
Specifically, “any proposals on that front” were unlikely to advance.
Her statement against potential tax cuts is not a surprise. Whitmer and her allies in the Democratic-controlled Legislature tried last year to thwart an income tax cut that had been written into law in 2015 as part of a road funding deal. They failed to stop it but won a favorable legal ruling from Attorney General Dana Nessel that will likely lead to an income tax hike, from 4.05% to 4.25%.
Other tax hikes may be in the offing. A bill to raise cigarette taxes by nearly $400 million was introduced late last year, as was a bill to add another payroll tax. The latter legislation has been viewed as a vehicle to pay for the costs of Gov. Whitmer’s recommended paid leave mandate, which may cost Michigan taxpayers an extra $1 billion per year.
Spending interests may want tax hikes because they’ve already spent much of the state’s excess cash. The Whitmer administration and its colleagues in the legislature last year frittered away the state’s $9.1 billion surplus on handouts to big corporations ($4.1 billion) and political pork (nearly $2 billion), including money for a splash pad, cricket field and a disc golf course. As satirist Dave Barry might say, “I’m not making this up.”
All of this new and desired spending raises fair questions. For instance, would any amount of our tax dollars be enough for the Whitmer administration and legislative leaders? Had the budget grown at sustainable levels since the 2018-19 fiscal year, lawmakers would have $6.5 billion more available to them—far more than would be needed to afford to lower taxes to 3.9% with no budget shortfall.
The Martin bill deserves a fair hearing. Michigan taxpayers deserve tax relief. Lawmakers have been spending too much and spending it on the wrong things. They ought to take their attention away from how to raise taxes and toward how they can take less from Michigan residents.
—————
Michael LaFaive is the senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, where he has worked since 1995.
