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What's really behind GOP push for income tax rollback?

Feb 20, 2017

There’s a battle over taxes emerging in Lansing.

Is it real? Or is it actually a proxy for other looming political fights?

Tax rollback

We could see action soon on a plan that would begin to rollback and eventually, after four decades, completely eliminate the state income tax.

But this idea from state House Republicans is getting the cold shoulder from Governor Rick Snyder, a lot of state Senate Republicans and, not to mention Democrats.

It's Just Politics with Zoe Clark and Rick Pluta

Republicans who support the tax rollback say, because the state is running a budget surplus, that the money should be returned to taxpayers. They also say there was a promise that a tax rate hike under Governor Granholm was only meant to be temporary.

But that promised rollback was stopped in 2011 by Governor Rick Snyder and legislative Republicans in order to balance the budget.

“Right now, this is about restoring that promise that was promised to our citizens several years ago. We believe that the hard-working taxpayers of this state deserve to have more money in their pockets,” Republican state House Speaker Tom Leonard told It’s Just Politics.

Economic concerns

There is a lot of pushback against the possible rollback. Many Republicans even are skeptical. They’re questioning the wisdom of simply ridding the state of an income tax.

There will certainly be lots of ups and downs to Michigan’s economy over the  next 40 years. Would this rollback fall victim to another “pause” during an economic slowdown?

Critics also say the plan wouldn’t actually save middle-class workers all that much money. A taxpayer with an average salary in Michigan would save $82 a year - that’s less than $7 a month.

But the hit on the state budget would be big - over a billion dollars in the first full year it’s implemented.

And, House Republican leaders don’t have a plan to either cut spending or find replacement revenue.

Other states have tried it

In super-Republican Kansas, the Legislature there just adopted an income tax hike. That’s after a budget disaster followed that state’s 2012 tax rollback that was not accompanied by a plan to cut spending.

But, here in Michigan, Speaker Leonard and his large class of newbie House Republican lawmakers say that’s not a problem that needs to be faced right now.

“We cannot borrow money. We cannot run a deficit. We will have a balanced budget when the time comes,” Leonard says. But that doesn’t mean the state won’t use accounting gimmicks and one-time windfalls to accomplish that.

Michigan’s CPA governor and a lot of Senate Republicans say they made tough decisions starting six years ago to break that cycle.

Politics takes center stage

But, behind all of this, the strong whiff of politics cannot be ignored. It’s no secret in Lansing that Speaker Leonard is eyeing his party’s nomination to run for state Attorney General in 2018.

But there’s a Senate Republican, Tonya Schuitmaker, who’s also making moves in that direction. Does a vote on an income tax rollback put her in a corner? That’s the sort of red meat Republican convention delegates who decide the nomination would eat up.

Just one potential internal rivalry that highlights a reality in the era of term limits. In Lansing, lawmakers hit the floor running - for their next jobs.