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Tax Relief Component Sends Road Talks To ‘Impasse’

October 20, 2015

Leadership discussions on an annual $1.2 billion road funding package hit “an impasse” Tuesday over an income tax rollback component Republican leaders want included in the final deal.

Legislative leaders continued talks throughout the afternoon and a tentative Wednesday quadrant meeting with Gov. Rick Snyder had not, yet, been formally scrapped as of 6 p.m. this evening.

“Nobody has told me we’re done so I’m not pushing the panic button,” said Lance Binoniemi, vice president of government affairs of the Michigan Infrastructure and Transportation Association (MITA), the group that’s advocated for increased road funding since the Gov. Jennifer Granholm administration.

Earlier this summer, the Senate passed a road-funding plan that featured an automatic rollback of the income tax rate every year General Fund revenues exceeded inflation. Theoretically, the income tax rate could shrink from its current 4.25 to 0 percent.

Republican lawmakers want some form of this rollback to make the final deal as a way to give some relief to taxpayers who ultimately would pay more in state gas taxes and possibly driver registration fees.

Last term, Democrats had advocated for a higher Earned Income Tax Credit (EITC) and/or Homestead Property Tax Credit exemption, tax cuts they see as benefiting the middle class as opposed to the income tax, which they see benefiting the wealthier taxpayer. The income tax rollback the Senate Republicans pushed was seen as too complicated and directly tied to roads.

House Minority Leader Tim Greimel (D-Auburn Hills) told radio host Michael Cohen this evening he has “serious concerns” about the assumptions being made on the impact a “bottomless” income tax cut would have on the budget.

Budget Director John Roberts tried to ease those concerns behind closed doors by sharing his office’s projections that “average economic growth over the next 10 years to be 2.5 percent,” which could absorb the impact of an income tax cut.

But those numbers conflict with the “serious” short-term budgetary concerns Greimel said the House Fiscal Agency (HFA) has expressed to him about “hundreds of millions” of lost General Fund revenues.

“The millionaires would see a net tax cut and everybody else would see a net tax increase,” Greimel said. “Let’s focus on roads and not tie it to other things . . . we’re not going to support any proposal that will jeopardize funding for public safety, education and health care.”

Gov. Rick Snyder and House Speaker Kevin Cotter (R-Mt. Pleasant) declared that road talks had hit an impasse shortly after noon after weeks of steady progress heralded by all members of the legislative quadrant.

The change in status, according to one source, came after Senate Majority Leader Arlan Meekhof (R-West Olive) — the legislative leader who has kept possibly the most positive attitude about finding a road funding solution — abruptly left Tuesday’s 11 a.m. quadrant meeting at roughly 11:45 a.m., 15 minutes before it was scheduled to end and about a half hour before any of the other principles left.

Meekhof blew past a pair of reporters waiting outside of the Governor’s Capitol office with a “hello,” declining to say a peep about what had happened inside the quadrant meeting.

Later in the day, Meekhof talked with both Greimel and Ananich on at least a couple of occasions and then issued a statement around 5 p.m. that said since road funding is a priority for Michigan residents, it will be a priority of the Michigan Senate.

“For me, taxpayers deserve long-term tax relief, especially when we are seeking additional resources to fund our roads,” Meekhof said. “I am disappointed that months of discussion and progress at the leadership level have stalled, but a standstill at the leadership level is not an indication of unwillingness on the part of the Senate.”

Cotter’s spokesperson added that “including tax relief in the deal has been part of the negotiations from day one, and it remains a Republican priority.”

Greimel declined to describe the discussions as being at an “impasse,” telling Cohen that there are “thorny” issues that still need to be worked out.

“We’ve made a lot of progress,” he said. “I think both sides have given on a number of issues. I want to continue meeting and see if we can talk through some of these last thorny issues. The people of Michigan deserve that.”

Cotter said there’s a lot of agreement on elements of a road funding plan, but challenges surrounding “tax relief” has stalled talks.

“At what point do you determine that something is not going to come together?” Cotter asked rhetorically.

Snyder told reporters that there is another meeting scheduled with the quadrant tomorrow that may or may not happen. But “unless I see progress, I’m not going to schedule one.”

The stalemate appears to be over the fiscal sustainability of a potential deal. Snyder declined to get too specific about it, other than to say, “People have different perspectives on what tax relief might look like.”

Senate Minority Leader Jim Ananich (D-Flint) issued a statement late Tuesday in which he expressed hope that there’s “still a window of opportunity to get this done right.”

“The group is close, and getting it right is more important than getting it done quickly. We need to reach an agreement that fixes the roads and helps working families of Michigan — it should be a compromise that doesn’t create more problems.”

The leaders said debate over the prevailing wage repeal didn’t come up as an issue at Tuesday’s meeting.

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