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Compromise on income tax cut plan just makes it worse

Feb 22, 2017

Well, at first glance it might look like the legislature came to its senses yesterday, at least so far cutting the state income tax is concerned. Unfortunately, it didn’t.

The lawmakers did drop the infantile notion of completely getting rid of the state income tax. They also backed away from cutting it from the current 4.25 percent to 3.9 percent overnight. But they still want to make that cut – just gradually, over the next four years.

This idea is in some ways worse, because it seems more sensible.

Even the current set of ideological hardliners in Lansing apparently realized they couldn’t muster a majority for what would amount to economic suicide – or that if they did, Governor Rick Snyder would veto it. So they compromised.

But death by slow poison is still death. Governor Snyder, who has stood up against the silliness, put it best.

“I still have a billion dollars’ worth of concerns because there has been no plan presented as to how this will affect residents and their communities statewide,” he said.

The governor noted that this would still blow an ever-increasing hole in the state general fund, one that will be more than a billion dollars a year by 2022.

The coming years, the governor said, are ones in which, “we have planned funding specifically to invest on modernizing our state’s infrastructure.”

That’s something we can’t postpone, and the governor sensibly said he wants to see a plan for this before he gives his blessing to this tax cut. There is no plan, of course, and not much thought behind this, other than a sort of demented Laffer curve theory that any tax cut is bound to spur investment and growth in the economy.

The state’s university presidents know how nuts this is, to use the proper academic terminology. A group of them gathered outside the house chamber to show their concern about what a large tax cut could do to our state. These are impressive women and men who are all both accomplished research scholars and scientists and the CEOs of billion-dollar public corporations.

Mark Schlissel, the University of Michigan’s president, is a medical doctor who also has a PhD in physiological chemistry. He noted that this wasn’t a conservative proposal but a radical one, that would “have a profound impact on the state’s future,” in part by putting higher education even more out of reach of the state’s citizens.

But in a scene so absurd you couldn’t make it up. Dr. Schlissel and the other presidents were essentially told they didn’t know what they were talking about by the tax cut’s intellectual godfather, Lee Chatfield, a 28-year-old state representative from a tiny town just south of the Mackinac Bridge. Chatfield, who has a bachelor’s degree from an obscure Baptist college now out of business, said “I challenge the presupposition that our budget will take a financial hit … I think this is a great way to grow our economy.”

Well, it’s not. An economist from the House Fiscal Agency told a subcommittee yesterday that this tax cut would be too small to produce any significant new consumer spending.

Everyone who understands it knows this would be a disaster for our struggling state. Let’s hope the governor stays strong enough to do the right thing.

Jack Lessenberry is Michigan Radio’s Senior Political Analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.