House Panel OKs Income Tax Cut Over Snyder's Opposition

DAVID EGGERT, Associated Press

LANSING, Mich. (AP) - A Republican-led House panel voted Wednesday to cut Michigan's income tax next year and eliminate it over a number of decades despite "serious concerns" lodged by Gov. Rick Snyder's administration.

Supporters said the bill approved 7-4 would fulfill a nearly decade-old promise to reduce the 4.25 percent tax to 3.9 percent after it was raised to help balance the budget in 2007. Opponents said the reduction would cost the state's $10.5 billion general fund $680 million in revenue next budget year and $1.1 billion the following year at a time the budget will tighten due to other tax cuts and policy changes.

The sponsor, Republican Rep. Lee Chatfield of Levering, said the tax cut would spur economic growth and allow people "living paycheck to paycheck to see meaningful tax relief. This allows them more buying power.

It allows them to keep more of their hard-earned dollars in their pocket."

State Treasurer Nick Khouri, citing "serious concerns" with the bill, said state and local business and other taxes have dropped a combined $2.8 billion since the Republican governor took office in 2011. Michigan had the 14th-lowest state and local tax burden in 2014, a drop from the 32nd lowest in 2010, he said. The personal income tax rate is the lowest among five Great Lakes states.

"How are we going to make up the $1.1 billion for the first full budget year?" Khouri said.

He estimated that the state has a budget surplus between $500 million and $600 million, but said it is a "one-time surplus" that will not recur year in and year out.

The House Tax Policy Committee voted after taking about 90 minutes of testimony in its first hearing on the legislation. Conservative groups testified in favor while organizations representing local governments, low-income people and school boards opposed the bill.

Two Republicans abstained from voting.

Republican Rep. Martin Howrylak of Troy said the panel did not deliberate enough and "the impact of this I don't think is fully appreciated." He said he would have been much more comfortable with reducing the tax by one-tenth of a percentage point per year instead of cutting it by 0.35 at first, and legislators should also focus on providing targeted tax relief to seniors and lower-income residents.

"It's not going to get to the governor's desk like this," Howrylak said. "But I think that that's the point of having the committee, so we can really roll up our sleeves and put some effort into it. This is going to be one of those messy things that gets resolved by negotiations with the governor's office, the Senate and on the floor, and I don't like it."

The panel's chairman, Rep. Jim Tedder of Clarkston, said further committee debate would not have changed the "scenario that played out," and he is confident majority Republicans will be able to offset lost revenue with spending cuts during the budget process.

"This is a philosophical issue," he said. "You're either going to be for income tax relief or you're going to be against it."

Republicans who lead the Senate also want to cut taxes, though they appear unlikely to move as quickly as the House. Legislative leaders and Snyder want to enact the next budget in June.

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