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Personal Exemption Talk Up, Income Tax Cut Talk Down

January 16, 2018

Senate Finance Committee Chair Jack Brandenburg (R-Harrison Twp.) one-upped Gov. Rick Snyder and Lt. Gov. Brian Calley Thursday by proposing a heightened personal property tax exemption of $4,800 by 2021, $300 more than the administration’s proposal.

The proposal comes as key legislators and the administration back away from any talk of lowering the state’s 4.25 percent income tax in the face of a projected windfall from President Donald Trump’s federal income tax change because Michigan’s sputtering General Fund is showing turtle-slow revenue growth. 

Legislative leaders are beginning to resign themselves to the reality that an income tax cut wasn’t in the cards last year and it’s not in the cards this year. 

“I don’t think the idea of tax relief is in the forefront of our minds right now,” said House Appropriations Committee Chair Laura Cox (R-Livonia). 

Rather, the focus has moved to the personal income tax exemption, which the Snyder administration fears is going away with the Trump tax plan. He wants to restore it back to $4,300 personal exemption and then increase it to $4,500. 

Brandenburg’s newly introduced SB 0748 would do the same thing but, in addition, hike the exemption by $100 per-year over the next three years, while remaining tied to inflation. 

“Michigan residents have not had any real tax relief over the past 20 years,” Brandenburg told reporters on the Senate floor Thursday. “I think the Governor is right when he says his cut would mean about $35 more for a family of four. Ours would go past $80 and up to about $100 over the next three years. It’s not the greatest thing in the world but it’s responsible.” 

According to information from Brandenburg’s office, the possibility that the exemption increase could eventually mean more than nearly $100 for a family of four was based on a different set of numbers than those that have been used by the Governor. 

Brandenburg was asked if he thought Gov. Snyder would be supportive of SB 0748. 

“I don’t know why he’d object,” Brandenburg replied. 

Reporters then asked Brandenburg if he thought the current push to cut taxes was “playing” into the GOP gubernatorial race. 

“I think their plan played into the governor’s race,” Brandenburg said. “That just gave me the idea to boost it up.” 

In response to reporter questions concerning theories that the federal tax changes do not zero-out Michigan’s tax exemption, Brandenburg said he couldn’t figure out what those claims are based on. 

“I’ve heard that argument,” Brandenburg said. “I’ll tell you this — our state tax law is very straight-forward, and on exemptions it follows along with what the federal number is.” 

Reporters asked Senate Majority Leader Arlan Meekhof (R-West Olive) to comment on Brandenburg’s plan. 

“Chairman Brandenburg has worked very hard with his group,” Meekhof said. “He’s already scheduled a hearing [on the bill] for next Tuesday.” 

In response to reporters asking how he thought Gov. Snyder would react to Brandenburg’s bill, Meekhof said: “I don’t know why the Governor would object to giving people back their own money.” 

Weighing in from the opposite perspective, Gilda Jacobs, president and CEO of the Michigan League for Public Policy, issued a press release today arguing that this is no time for an “irresponsible election year tax cut.” Her group supports the Snyder/Calley proposal, opposes any tax cut talk and was silent on Brandenburg’s accelerated exemption idea. 

“This morning’s numbers show that lawmakers need to carefully consider what lies ahead,” Jacobs is quoted as saying in the release. “The state’s General Fund will be strained over the coming years by potential federal cuts and by funds already committed to roads and tax relief for businesses. 

“Some elected officials in Michigan still have tax cut fever in 2018 and are thinking more about the ballot box than balance sheets, but they need to understand that there’s no money or political will to do that.” 

Budget Director Al Pscholka observes that there is “moderate growth” and one of the question marks is taxes and efforts in some circles to roll back the income tax rate. 

“Once you start rolling back the income tax rate, you’re going to put solid pressure on the General Fund,” he warns. 

House Tax Policy Chair Jim Tedder (R-Clarkston) signaled earlier this week that he’d like to take another run at a rate cut. 

But Pscholka said he’d prefer to leave the rate alone for now. 

“Please look at the data,” he offered, referring to budget data that suggests the state has other baked-in budget costs that must be met first. 

He advised that at the end of the day, the state has to have a “balanced budget.”

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