Taxes, as we all know too well, are a powerful political issue. And the issue has come up yet again at the state Capitol. A cut in the state income tax has become part of the negotiations as Gov. Rick Snyder and the Legislature's top Republican leaders wrap up their budget negotiations. Rick Pluta, Lansing Bureau Chief for the Michigan Public Radio Network, and I sit down to talk politics every Friday and today, in It's Just Politics, it is all the politics of taxes.
Rick Pluta: The governor and the Legislature have set this deadline of June 1 for wrapping up the next state budget.
Zoe Clark: And that's important, because - even though the state's fiscal year begins October 1 - schools, community colleges, cities, townships, and counties all have budget years that begin July 1. They all have budgets that are tied into state spending.
RP: Right. Now, in the final days of discussions, Republicans have put an income tax cut on the table. State House Republicans will roll out the legislation next week.
ZC: So, that begs the question: why are they doing it now?
RP: Well, for a year and a half, Democrats in Lansing have hammered Republicans because all the tax and budget reforms have focused on reducing costs for businesses: eliminating the Michigan Business Tax on 95,000 businesses and the proposal to eliminate the tax on industrial equipment.
ZC: At the same time, a dozen tax credits and exemptions claimed by homeowners, parents, seniors on pensions, and poor families earning incomes were ended.
RP: And Democrats have been pounding Republicans with that incessantly and with an eye toward the November elections - when, we should note, all 110 seats in the state House of Representatives are up for election.
ZC: So now, courtesy of Republicans, a proposal for income tax relief.
RP: The main bills in the tax rollback package will be sponsored by state Representatives Holly Hughes and Ed McBroom, Republicans representing districts that are considered marginally - 51, 52 percent - Democratic.
ZC: And Democrats most certainly want those seats back.
RP: Exactly, and this shows Republicans intend to put a fight in these seats by giving their incumbents these bills. One accelerates a reduction in the income tax rate; the other increases the personal exemption. But the bottom line is Republicans want the message to be: Republicans equal tax cuts. Democrats, however, have already revealed their counterattack.
ZC: And the counterattack is really what their message has been all along. Since last year, GOP hegemony in Lansing has meant tax cuts to businesses while seniors, homeowners, and working poor families all lost tax breaks that they've counted on, as well as reductions for schools, universities, and local governments.
RP: Right, so Democrats say this so-called "tax relief:" 50 cents a week, nine dollars a person per year is pretty meager compared to the costs that everyone has had to pick up in the name of improving the business climate.
ZC: But still, a tax cut is a tax cut. Can this message work for Republicans?
RP: Well, Zoe in the late 1980s, Governor Jim Blanchard, a two-term incumbent, was suffering through the legislative wars over property taxes. As home values rose, taxes rose. People opened their tax bills wondering if the news inside would be they could no longer afford their homes. The Legislature responded with all kinds of proposals for property tax relief - some of them literally would have given away the whole state budget - and really weren't meant to be taken seriously.
ZC: But Governor Blanchard saw that he'd better engage on the issue and offered a property tax plan as he prepared for his 1990 reelection campaign.
RP: His adversary was state Senate Majority Leader John Engler, a candidate who certainly made sure the issue remained hot and alive in the Legislature. And Engler famously damned the Blanchard plan with faint praise - he said homeowners would get a meager five cents a week. He made an ad around that theme. The nickel became a campaign symbol. The choice in the election became, do you want a nickel...
ZC: ..."Or change?..."
RP: Engler won by a very, very close margin. And went on to make a name for himself as a popular tax-cutting governor. Of course, he had the good fortune to be governor during the amazing boom of the 1990s when the economy was so robust that politicians could cut taxes AND increase spending on schools and other things. Which they did...
ZC: Days that today's crop of politicians can only dream about, Rick.