Legislature Speeds Up DRF Phase-Out; Passes $4,900 Personal Exemption

Weeks of negotiations bore fruit Wednesday as Gov. Rick Snyder and the GOP-controlled Legislature reached a deal to speed up the elimination of the Driver Responsibility Fees (DRF) by October and hike the state’s personal income tax exemption to $4,900 by 2021.

The House and Senate Wednesday afternoon swiftly moved the multi-bill package to do away with the DRFs (HB 5040, HB 5041, HB 5043, HB 5044, HB 5046, HB 5079, SB 613 and SB 625) and the two bills (SB 748 and SB 750) that increase exemption. Every bill passed unanimously, with the exception of SB 748, which got two no votes in the House.

Sen. David Knezek (D-Dearborn Heights) offered an amendment to SB 748, which would have restored language that had been stripped out under the deal, to hold the School Aid Fund harmless. This amendment failed, 17-19, but this didn’t deter the Democrats from supporting the bill on final passage.

“When we talk to taxpayers, they want improved schools, improved roads and they want money in their pocket. And today we delivered it,” Senate Majority Leader Arlan Meekhof (R-West Olive) told reporters following session in reference to both the exemption increase and ending the DRFS.

The total cost of outstanding fees for the DRFs comes to $637 million, but there’s an open question as to how many of those would have been realistically collected.

Reinstatement fees for those who have been hit with the DRFs were $125 per person, but the legislation that passed Wednesday eliminated those fees, as well. The cost in lost revenues to state government from the exemption increase — once fully implemented, will be a $176.3 million tax cut.

Reporters asked Meekhof if the Legislature would still be able to pass the Governor’s planned K-12 and road funding hikes even with the passage of the exemption increase and the cost of ending the DRFs.

Meekhof’s answer was a simple, “Yes, we can.”

Enacted in 2003 to help patch up a slumping state budget, the DRFs are an additional fee automatically charged for various traffic violations, including non-moving violations, on top of regular traffic citation fines and court costs. Unlike traditional court fines and fees in which a judge can take into consideration a driver’s ability to pay and order alternatives, the automatically-assessed DRFs cannot be waived or reduced by a judge. 

Although over the years the DRFs had been considered bad public policy, the lawmakers had been moving slowly toward phasing them out because of the revenue impact getting rid of them completely would have had on the budget.

This year, however, the push to end the DRFs seemed to be reaching critical mass with House Speaker Tom Leonard (R-DeWitt) driving the bus.

In early January, Snyder and Lt. Gov. Brian Calley announced their proposal to restore Michigan’s personal tax exemption, plus increase it by $500 to $4,500 by 2021. 

Senate Finance Committee Chair Jack Brandenburg (R-Harrison Twp.) followed up by introducing legislation (SB 748) to increase the exemption over time to $5,000. The Senate promptly passed SB 748 unanimously, while the House favored a $4,800 hike and negotiations between the two legislative chambers and the Governor began. 

MIRS asked Brandenburg Wednesday how he felt about the final agreement that landed on a $4,900 increase.

“Hey, I’ll take nine-tenths of a loaf any time,” Brandenburg said.

Under the bills, the exemption will be $4,050 for the 2018 tax year, $4,400 for the 2019 tax year, $4,750 for 2020 and $4,900 for 2021. When fully implemented, the bills are expected to save the average family more than $100 a year.

“When we passed a similar measure out of the House not too long ago, I spoke and said that was a good start, but we needed to increase the personal exemption even further. I’m glad to see that this chamber, in its wisdom, has taken my advice and we’re moving forward to make sure we are finally providing real tax relief for the hard-working families of Michigan,” said Rep. Tim Greimel (D-Auburn Hills). “This was needed to fix a major problem in the federal tax law that was recently passed. But this goes even further and expands tax relief for Michigan families that is long overdue.” 

On ending the driver responsibility fees quickly, Leonard said it was important to him that 300,000 people who currently aren’t able to drive due to overdue fees be able to get their driver licenses, find a job, go to school, take their kids to the doctor or do “whatever it is that they need to do.” 

“These bills also are the last vestige of the lost decade,” said Rep. Joseph Bellino (R-Monroe). “. . . For too long these fees have left people in financial straits often resulting in loss of jobs . . . These fees have ruined lives, ruptured souls and raided bank accounts to the tune of hundreds of millions of dollars.”