taxes

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Update 12:21 p.m.

The State of Michigan will have to honor some tax credits for years to come because of contractual obligations.  In a speech today, Governor Snyder indicated over the next four years, the state was on the hook for $2-billion dollars in credits.  About $500-million of that is in next year's budget. 

March 2nd, 8:23a.m.

Governor Snyder says his approach to taxes in Michigan is “simple, fair, and efficient.”  One way the Governor wants to make the tax structure more fair is by eliminating all tax credits for business.  It’s a controversial move which surprised many people in Lansing.

Bill Rice / Flickr

Governor Rick Snyder is defending some of his controversial budget plans.

He says taxing pensions is the right thing to do, even though some Republican lawmakers say they will not support that plan.

And Governor Snyder says his proposal to cut funding for universities by 15% this year is necessary, but he says it will get better for the schools in the future:

"We shouldn't have to walk away from our universities. Again, I'm a big, long-term advocate of we need more students going through our universities. Higher Ed is very important in our state, actually we're a very fortunate state in having the high-quality institutions that we have.

We have a tough budget situation and we need to deal with that, but if you look forward to 2013 we’re able to show that hopefully this is the bottom point in terms of where we go with higher education funding."

Snyder also told building-trade union members that he wants to work with unions to help balance the budget, not against them.

He says he is not interested in Republican proposals in the Legislature to strip unions of their power.

Image from the Center for Michigan's website

Try your hand at fixing the state's budget problems.

The Center for Michigan has released an interactive state budget calculator - YOU Fix the Budget.

The idea is similar to the New York Times interactive budget calculator for the federal government.

You can start by adding $1.2 billion to the state's budget woes by cutting business taxes, or you can leave business taxes alone and deal with the current budget hole the Center estimates at $1.4 billion.

Once you start, your options are to cut, cut, cut (cuts to education, cuts general government, cuts to prison and police, cuts to the public workforce, and cuts to welfare and health care) - or - you could raise taxes.

So far, of the 300 or so people who have participated - raising the Beer Tax is the most popular option.

Andrew McFarlane / Creative Commons

A new study shows Michigan’s tax incentives for the TV and film industry generated close to 4,000 fulltime jobs last year with an average salary of $53,700.  

Larry Alexander is President & CEO of the Detroit Metro Convention & Visitors Bureau, one of several bureaus across the state that helped commission the study.

“Diversifying Michigan’s economy by investing $84.7 million- and generating over a half a billion dollars of economic activity and nearly 4,000 high paying jobs- sounds like a pretty good deal to us.”

Rick Hert heads the West Michigan Film Office. He says talk about limiting the film incentives in the past reached Hollywood and caused some producers decide not to come to Michigan.

 “This is much bigger. This is a new governor of the state of Michigan and his comments are doing more than reverberating, they’re putting a clamp on the future of this industry.”

Hert is thankful the governor didn’t totally remove the incentives, but worries they’ll be too limited to keep attracting producers.

Hert says he understands the state is broke and that legislators have some tough calls to make.

Lester Graham / Michigan Radio

Each Wednesday, Morning Edition Host Christina Shockley sits down with Michigan Radio’s Senior Political Analyst Jack Lessenberry to get an update on state politics. This week, the focus is on Governor Snyder’s budget proposal and what cuts he might suggest.  

Steve Carmody / Michigan Radio

By some estimates, the city of Flint is facing a $17 million budget hole.

Flint's Mayor is hoping state officials will allow the city to go to the bond market to overcome the budget deficit.

The State Administrative Board is meeting tomorrow to give a thumbs up or a thumbs down to the city's request.

The Flint Journal reports:

A state board made up of Michigan's top elected officials (or their delegates) is expected on Tuesday to consider the city's application to issue $20 million in bonds, part of Flint Mayor Dayne Walling's budget plan.

The State Administrative Board meeting will take place at 11 a.m. in the Lake Superior Room of the Michigan Library and Historical Center in Lansing. The meetings are open to the public.

Michigan Radio's Steve Carmody reported that without the money, Mayor Walling said the city will have trouble making payroll in March:

“There is nothing more important for our city right now than the bond.   We’ve been carrying a crushing load of past deficits on our shoulders.  And we’ve come to the point where the pooled cash is not there to make payroll throughout the entire month of March without an infusion of cash,” said Mayor Walling.

If state officials do not approve of the bond plan, the state may eventually takeover Flint’s finances.

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The Michigan Small Business Tax isn’t the only tax getting attention right now: A lawmaker from Battle Creek wants to eliminate the personal property tax that businesses pay.

State Sen. Mike Nofs, R-Battle Creek, says Michigan doesn’t create a very welcoming climate for business.

Nofs wants to get rid of a tax that businesses pay on things like equipment and furniture.

Michigan’s current personal property tax is based on a community’s millage, and generates revenue for local governments.

Homeowners are starting to get their property tax assessments in the mail. A few organizations are hosting workshops for people who think their home’s value might be over-assessed.

Rose Bogaert is chair of the Wayne County Taxpayers Association:

"Going to the Board of Review and saying 'my taxes are too high' will get you nothing. You have to have information that justifies your contention that your house is over-assessed."

Bogaert says her organization’s workshops educate homeowners about things like how to analyze sales in their neighborhoods. Information about the Headlee Amendment and Proposal A – which govern property tax assessments in Michigan – is also part of the workshops.

Oakland County officials are also hosting a series of sessions about tax assessments through early March.

Governor Snyder will roll out a citizen’s guide to the financial troubles facing the state, local governments, and school districts before a meeting of business leaders in Lansing this afternoon.

The governor is a retired investor and certified public accountant. He says the guide will give the public an easy-to-grasp outline of the condition of government finances in Michigan.

Governor Snyder says the state’s official financial report runs more than 200 pages and is too big and complicated, and it’s filled with too much bureaucratic jargon for most people to understand.

Snyder says his administration has picked what he considers the most critical information, such as the state’s revenue-to-expenditures, its reserves, and long-term obligations such as pensions, and put it into an easy-to-follow 13-page briefing:

“So I think this will be a big help in terms of the stage for a more-informed discussion, where all the public can participate because we’ll all have better facts to work off of and we’ll see how far beyond our means we’ve actually spent.”

Estimates peg the state’s budget shortfall for the coming fiscal year at about $1.8 billion.

The governor will present his plan to balance the budget later this month.

Governor Rick Snyder has not yet said whether he’ll support efforts to increase state taxes on the lowest-earning workers in Michigan.  He has indicated he’ll have something to say about whether to eliminate the Michigan Earned Income Tax Credit when he gives his budget address.

“Well, we’ll save that for mid-February.  But the Earned Income Credit is largely a federal program.  That’s the main driver that brings results, is the fact that it’s on your federal return.  It’s a question of how much difference does the Michigan piece of that make in terms of changing behavior.”

Governor Snyder makes no bones about wanting to get rid of the Michigan Business Tax. Some details of his plan were revealed today.

But by getting rid of the business tax, the state will be left with $1.5 billion tacked onto its existing projected deficit for the next fiscal year.

Today, the Governor spoke to the Michigan Press Association at the Detroit Marriott. In his speech, he addressed how he plans to make up the shortfall.

From the Associated Press:

Gov. Rick Snyder says he wants to include most tax breaks in the budget rather than burying them in the tax code...Snyder says it's imperative to get rid of the Michigan Business Tax, which he considers "a dumb tax." To make up the revenue lost by having a lower corporate income tax, he wants to look at existing tax breaks and get rid of those that aren't moving the state forward. The governor says tax breaks should be included in the budget so they can be debated and weighed on their merits.

The Detroit Free Press reported on Snyder's speech as well. The Governor said that one of the "biggest tasks as the chief executive of the state is to find the elusive “they” in state government." From the Freep:

Snyder said his first days in office were a revelation. “The IT guys were in hooking up my computer and I had a square screen,” he said, explaining that it didn’t make sense because the larger, landscape computer screens are better and less expensive. “They told me ‘It’s been 10 years and they said that’s what we had to do,’” Snyder said the IT guys told him. “Almost on a daily basis, I hear about ‘they’ and they tend to have a different opinion that I have. I need to find out who they are and where they reside.

gophouse.com

Governor Snyder has said he wants to do away with the complex, "job-killing" Michigan Business Tax, and replace it with a more simplified flat tax for businesses in the state.

Some republicans in the Michigan legislature are beginning their push for a repeal of the state's Earned Income Tax Credit (EITC).

It's a credit that bell-weather conservatives, like Gerald Ford and Ronald Reagan, have supported on the federal level.

Library of Congress

The idea of an Earned Income Tax Credit, giving people who have low-income jobs a bit of a tax break, has been around for a while.  In 1975, a Michigan Republican, Gerald Ford, signed the first federal credit into law while he was president.

Proposals for different ways the state delivers payments to local governments for services are bubbling up at the state Capitol.

A bill in the state Senate would distribute revenue sharing payments to cities, townships and villages based on population.

http://www.house.gov/levin/

A Michigan Congressman says U.S. automakers need more help to sell large numbers of electric and hybrid vehicles.

The Obama administration has set a goal of one million plug-in hybrid vehicles on the road by 2015.

There’s already a federal tax credit of $7,500 to help defray the cost of buying a hybrid or electric car.   But there’s a cap on how many of the credits are available to each automaker. 

Michigan’s local governments say if the state cuts revenue sharing, then they should be allowed to ask voters for new taxes to replace that money.

The Michigan Municipal League met with Governor Rick Snyder last week, and has answered his call for proposals to save money and cut costs for local governments, and to make communities more viable and attractive.

Dan Gilmartin is executive director of the Municipal League. He says it starts by looking at regions:

Economies in Michigan are regional. The dirty little secret is there is no state economy. And there’s certainly no local economy. Economies are regional.

Gilmartin says local governments need the authority to ask voters for region-based taxes to support development, and maintain roads and services.

Lester Graham / Michigan Radio

Republicans at the state Capitol are working to get rid of a tax credit for working poor people.

But people who support the Earned Income Tax Credit say the money helps poor people keep their jobs.

Without the credit they might have to go back on welfare, an they say that would cost the state more money.

Gilda Jacobs, director of the Michigan League for Human Services, says all lawmakers have constituents who claim the credit:

"We have some districts where 18% to 20% of the people are filers of this, and they’re putting multi-millions of dollars back into small businesses. So we kind of need to ask people to see this up-close and personal and to really be open to understanding what this is all about."

Republican House Speaker Jase Bolger says the state cannot afford the Earned Income Tax Credit right now:

“The Earned Income Tax Credit is very new in Michigan. It didn’t exist a couple of years ago. It was added at a time where I believe we couldn’t afford it. So as we look at how we are going to revamp Michigan and how we are going to move forward, we have to evaluate things that we can maybe no longer afford, however we do have to look at that with a broader tax structure, and we have to understand that the best social program is a good-paying job.”

Bolger says eliminating the Earned Income Tax Credit will be part of a large package of reforms that are expected to be introduced soon in the House.

Supporters of the tax credit say they have a lot of work to do to convince lawmakers that getting rid of it would hurt people in their districts.

Lester Graham / Michigan Radio

Senate Bill 1 has been introduced, and you can read it, in its entirety - here you go:

The Michigan business tax act, 2007 PA 36, MCL208.1101 to 208.1601, is repealed.

The bill was introduced by Senator Dave Hildenbrand and comes in advance of Governor Rick Snyder's State of the State address tonight.

Replacing the Michigan Business Tax was one of candidate Snyder's main promises to voters.

Laura Weber of the Michigan Public Radio Network filed a report on Senate Bill 1:

Senator Dave Hildenbrand...says his bill is more aggressive than a similar bill introduced by House Republicans, which only repeals part of the business tax:

"Well we wanted to send a strong message that we want to create a better business climate in this state so our job providers can provide jobs. It’s pretty clear, I think to all of us, that the Michigan Business Tax is an obstacle for employers to good create jobs, expand, for the ability for us to attract job providers to Michigan. So we’ve declared war on the Michigan Business Tax."

Governor Rick Snyder wants to replace the Michigan Business Tax with a flat tax on large businesses. Snyder is expected to talk more about his plans for economic development during his State of the State address tonight.

flickr - user harry_nl

The Michigan Manufacturers Association (MMA) says Michigan is getting it's "butt kicked" when it comes to taxes.

In the Detroit Free Press, the MMA's vice president for government affairs, Mike Johnston, was quoted when talking about personal property taxes on equipment.

From the article:

The U.S. House of Representatives voted to extend Bush-era tax breaks and extend jobless benefits for the long-term unemployed yesterday.  The tax-deal was brokered between President Obama and leaders in the House and Senate.  The President is expected to sign the bill soon.  As The Associated Press reports:

In a remarkable show of bipartisanship, the House gave final approval to the measure just before midnight Thursday, overcoming an attempt by rebellious Democrats who wanted to impose a higher estate tax than the one Obama agreed to. The vote was 277-148.

Republican Congressman Dave Camp of Michigan told USA Today:

Congress made the right decision ... to prevent a job-killing tax hike on Americans and small businesses.

The U.S. Senate had already passed the bill with a 81-19 vote.

GMC SUVs in a car lot
user ep_jhu / Creative Commons

The Center for Automotive Research released a report today that analyzed the government bailouts of General Motors and Chrysler.

$80 billion was given to the auto companies. To date $13.4 billion has been repaid.

Tomorrow the GM "initial public offering" is expected to raise another $22 billion.

The reports authors say that even if the government doesn't get all of the $80 billion back, the government's investment will still have been worth it.

The report concludes:

Timothy Geithner at the White House Correspondents Dinner in 2009
Jay Tamboli / Creative Commons

The Wall Street Journal is reporting that GM's IPO tomorrow could be a biggy:

General Motors Co. said Wednesday that it will increase the size of its initial public offering by about 30% to 478 million shares, which could make it the largest global IPO in history.

Screen grab of New York Times web page
Screen grab from the New York Times

It's easy to criticize. Now you're in charge.

The New York Times has created a slick little interactive tool that displays different solutions to the country's projected budget deficits.

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