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The truth about Michigan's proposed income tax cuts

Feb 15, 2017

In Lansing, the Michigan House Tax Policy Committee was to begin discussions today on a proposal that most Republicans are ecstatic about.

That would be a bill to immediately roll back our state income tax from 4.25 percent to 3.9 percent, and then keep cutting it by a tenth of a percent every year until it would be gone entirely. Well, completely getting rid of the income tax is a fantasy for four-year-olds.

Nobody takes that seriously except as a way to fool the voters.

But they may well cut the income tax to 3.9 percent. Yesterday, Michigan Attorney General Bill Schuette joined the chorus of those supporting that.

“We must be a state that allows our hardworking men and women to keep more of what they earn, and for the government to take less of what they make,” he posted on Facebook. Those are nice eloquent-sounding words.

Who could disagree with that? The only trouble is that it’s all utter nonsense. What a tax cut like that would do is blow a $1.1 billion dollar hole in the state general fund budget next year, according to the House Fiscal Agency.

That’s a billion dollars out of a general fund budget of a little over $9 billion. If it were to be passed and take effect soon, it could knock another almost $700 million out of this year’s budget. Again, these are calculations made by the economists employed by the legislature, whose job is to report to our lawmakers the potential effect of their actions.

Here’s what that would mean: Less money for schools, less money for roads, for infrastructure repair, for fixing the pipes in Flint – for all the things that make civilization possible. But according to the bill’s sponsor, Lee Chatfield, and Michigan’s attorney general, it will all be worth it, because it will allow the common man to keep more of what he makes.

Unfortunately, that’s a total scam. The non-partisan Michigan League for Public Policy calculated exactly what this tax cut would mean to people. The average annual income in this state is about $51,000, according to the marvelously named Department of Numbers.

Such a person would get a tax cut of $82 dollars – a year. That’s not enough to fix one tire destroyed by a pothole or pay for one credit hour at the cheapest state university.

Bill Schuette, who makes more than twice that, would get a tax cut of about $300 a year. That would be pretty meaningless to him too, since he is independently wealthy.

But a venture capitalist or a medical malpractice lawyer making a million and a half a year would get a cut of almost four thousand dollars a year. This is a mechanism to destroy state services and transfer money to the rich, and leave the rest of us with chump change.

Bill Schuette knows this, of course, but he is interested in winning next year’s Republican gubernatorial primary, and he calculates this will sound good to those voters. Maybe so. But it would badly hurt most of us.

I grew up with the quaint notion that we should be honest about what any proposal would mean to the people it affects. Those trying to ram this bill through won’t tell you.

So I just did.

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.