House income tax cut dies in dramatic fashion
March 1, 2017
Article courtesy of MIRS News Service
A measure to cut the 4.25 percent income tax to 3.9 percent as long as there’s $1 billion in the rainy day fund failed to get the 55 votes needed for passage. The bill fell 52-55 in a dramatic failure after a 12-hour session (Wednesday/Thursday) marked by House Speaker Tom LEONARD (R-DeWitt) working members off the floor all afternoon, evening and night.
Under the reworked version of HB 4001, offered at around 1 a.m. Thursday morning, a scheduled four-year roll down of the state’s 4.25 percent income tax rate would stay at 4.05 percent if the state’s Budget Stabilization Fund is projected to fall below $1 billion.
The income tax reduction would continue once the rainy day fund balance returns to $1 billion, under the plan. There’s currently $734 million in what is formally known as the Budget Stabilization Fund (BSF). The Governor’s budget proposal for FY ’18 included bringing the fund’s balance up to just over $1 billion.
Most of the Republican caucus voted for the plan, but the following 12 voted no: Reps. Chris AFENDOULIS (R-Grand Rapids Twp.), Julie CALLEY (R-Portland), Kathy CRAWFORD (R-Novi), Daniela GARCIA (R-Holland), Larry INMAN (R-Traverse City), Ben LILLY (R-Park Twp.), Dave MATUREN (R-Vicksburg), Mike MCCREADY (R-Birmingham), Dave PAGEL (R-Berrien Springs), Brett ROBERTS (R-Charlotte), Scott VanSINGEL (R-Newaygo) and Jason SHEPPARD (R-Lambertville).
Rep. Scott DIANDA (D-Calumet) was the only Democratic “yes” vote.
Leonard maintained that he anticipated the vote to fail when it went up on the board, but that he put it on the board to allow members “to show the world where they stood in terms of defending the taxpayers of our state.”
The Speaker said the caucus will move on with the budget process over the next three to four months, but did not disclose a plan to bring the tax plan up for another vote.
“I’m proud of our Speaker for standing by his commitment that he made to our caucus,” said House Speaker Pro Tem Lee CHATFIELD (R-Levering), the sponsor of HB 4001. “Now we move forward together and begin tackling the other important issues facing our state.”
During the floor debate Rep. Jim TEDDER (R-Clarkston) had possibly the most memorable line when he urged members not to support the “MAWS.”
“Many of us have been lobbied quite heavily this week — emails, phone calls, visits out on the tiles. And I can tell you none has been more relentless than the effort put forth by the MAWS,” Tedder said. “You’ve all heard of them, of course. Of course you have, the Michigan Association for the Working Stiff. Oh, I’m sorry, they don’t have a lobby do they? We are sent here to be their lobby to be the voice of those working too hard to be activists and who are too poor to have lobbyists on retainer.”
Behind the scenes, some conservative Republicans saw the vote as a residual from last fall’s leadership elections — that certain West Michigan members weren’t going to support Leonard on his first big policy push, whatever that may be.
One source said, “We had a group who couldn’t get past the leadership race and were bound and determined to shut down the House for the foreseeable future.”
McCready said that was not the case. He was among a core group of members who wanted to see what cutting the budget would look like and weren’t willing to go to 3.9 percent until they did. A one-time cut to 4.15 percent was put on the table, McCready said, with a pledge to revisit the tax rate in 2018, but that was rebuffed.
“If they’re looking for excuses, they’re kidding themselves,” he said.
MIRS heard multiples reports that threats were made that committee assignments, chairmanships, staff allocations and even parking spaces were being put on the table.
“We’ll see what happens,” a source told MIRS when asked about the potential of any of those things happening to a member.
Conservative members urged their colleagues to support Leonard on the vote. Voting for HB 4001 was more symbolic, a starting point. Legislative leaders would make the final decisions behind closed doors anyway.
Another subplot behind the vote was the perception that Leonard was only pushing the issue to boost his conservative bona fides going into a presumed Republican Party convention fight for Attorney General.
“Anytime you can watch the kickoff of an attorney general campaign from the House floor, you have to watch it,” tweeted Sen. Curtis HERTEL, Jr. (D-East Lansing).
While the Speaker was in the caucus room behind closed doors, House Minority Leader Sam SINGH (D-East Lansing) circulated a House Fiscal Agency (HFA) document that reported a $2 billion budget shortfall in Fiscal Year (FY) 2022 if the income tax cut was put into effect.
The cut itself would be $1 billion, but the additional spending pressures and tax reductions — as outlined by former HFA Director Mitch BEAN on Friday — already has a projected 2022 budget $1 billion in the hole.
Singh said he would have recommended a lengthier committee process to work out the legislative kinks.
“If you don’t have a policy that is working you should have kept it in committee. That would have been my recommendation,” Singh said.
Democrats opposing the bill spoke up on the floor. They pointed out the tax cut benefits the wealthiest rather than the middle class.
“Under the parameters of HB 4001, a person making $35,000 a year living in my neighborhood would see a savings of about $10 a month by year four of this income tax cut,” said Rep. Jeremy MOSS (D-Southfield). “A person making $35 million a year . . . would see a savings of $122,500 in an income tax cut by year four. It would take the person making $35,000 three and a half years just to earn the amount of money in their salary to match the amount of tax savings that one of the wealthy people in my district would gain from House Bill 4001.”