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Governor's road plan faces more problems

Jan 30, 2015

Credit Steve Carmody / Michigan Radio

In the very final hours of lame duck last December, state lawmakers slapped together a complicated road funding package that is proposal one, which citizens will be voting on in May.

Now comes an analysis from economist Patrick Anderson of East Lansing that finds this road deal could pack an unpleasant consequence for 1.2 million Michiganders when they go to file their federal taxes.

The proposal is already a tough sell by asking voters to raise sales tax, but its changes in taxing vehicle registration fees will also cause many residents to pay more according to Detriot News Lansing Bureau reporter Chad Livengood.

The tax on the sticker price of vehicles in Michigan currently uses a depreciation scale, where every year the value is lowered by 10%, leading to lower tax bills over time according to Livengood. The proposed change would eliminate the reduction, and instead lock the tax value for the life of the vehicle says Livengood.

According to the calculations from economist Paul Anderson this could lead to $410 million in lost deductions for tax payers, equating to $102 million in additional taxes being paid by around a million people, about quarter of tax payers, says Livengood.

Anderson's calling this a hidden tax, but Livengood said this is a "less painful approach" than the alternative of vehicle registration. It would still be up for evaluation by the IRS before going into effect.

Along with the publicity the elimination of the depreciation is receiving, the consulting team working on the ballot campaign for the governor also withdrew their proposal today, citing philosophical differences with his office.

The bi-partisan team previously ran the successful repeal of personal property tax on industrial equipment last August, along with helping to defeat the renewable energy campaign in 2012. Their departure only a few months before the vote does not bode well for the governor.

These complications are creating "a few potholes in the pathway to a sales tax increase," says Livengood.