When Governor-elect Rick Snyder takes office Jan. 1, one of his top priorities is to replace the Michigan Business Tax with a 6 percent corporate income tax. He says this tax model will stimulate the economy and create jobs, making the state of Michigan more attractive to graduating students. Yet, economists and tax experts say the tax cut is impractical with the state facing a $1.7 billion budget deficit for 2011-12.
The 2010 Michigan Gubernatorial Race is underway and candidates are now preparing for the primary election in August. Each candidate has come out and stated the need for changes in our tax policy, but each candidate also has their own ideas for how this should be done. (Read more for each candidate's tax policy proposals)
In 2007, Michigan lawmakers faced at that time, budgetary woes unparalleled to previous years. With a projected budget deficit near 1.8 billion dollars and a looming October 1st deadline, the legislature was pressed to find a way to balance the budget. The solution was to extend the 6% sales tax on consumer goods to include services as well. However, this rushed and exemption-filled tax was later repealed and replaced by a surcharge on the Michigan Business Tax. Two years later, the surcharge is despised by many groups in Lansing, and many are looking to repeal it. Though both Democrats and Republicans are looking to repeal the surcharge, their differences in belief of what role government plays has derailed them from any action thus far.
The Michigan legislature is looking for revenue to make up for the large deficit we are facing. Recently, reports have suggested that Michigan should question its retiree pension tax exemptions. According to the Michigan Department of Treasury, taxing all retirement income could generate between $600-700 million.
Tax expenditures help shape a state's tax structure, but unfortunately are often overlooked when creating tax policy during the budget planning. Michigan is looking at a $2.8 billion deficit for FY 2010. This corresponds with our now $35.8 billion tax expenditure level for FY 2009. This is about a $2.2 billion increase from FY 2008.
Taxes
Tax Amnesty, Will it Work?
Written by Lindsay Catherine
Monday, 19 October 2009 02:23
Last week, the Senate voted to pass an amnesty period on unpaid taxes for the citizens of Michigan of the 2008-2009 Fiscal Year (which ended almost three weeks ago, on September 30th).
This would allow a 30-60 day grace period in which those who have not already paid their taxes, could pay the state without penalty. If someone chooses to not use the amnesty, they would be subject to a 25% penalty in addition to the taxes already owed. This legislation is estimated to bring in $35 million dollars in revenue.
With a majority of the senate being republicans, the bill passed. It will still have to be passed by the House which has a democratic majority, and signed by Governor Granholm. Democrats in the Senate were opposed to the bill because of the nature of the bill. Senator Deb Cherry (D-Burton) stated "Tax reform should be comprehensive in nature...[tax amnesty] does not provide revenue for the current budget."
How Michigan's Budget Battle Will Affect Your Taxes
Written by Patrick Heffner
Thursday, 15 October 2009 04:52
As we find ourselves two weeks past the original, October 1st deadline for a state budget deal, many of the remaining disputes have crystalized into a sharp, partisan divide over how to deal with six crucial budget bills. On one side, you have the Republican Senate, led by Senator Mike Bishop, who wish to bridge the remaining gap using spending cuts to major government programs. On the other hand, Governor Jennifer Granholm would like to use revenue increases (tax increases) to fill the budget hole, saving what in Democrats minds are vital government programs from damaging cuts. But what does this debate mean to you?
The Mackinac Center's Proposal for our Fiscal Situation
Written by Lindsay Catherine
Wednesday, 14 October 2009 09:54
At a time when our state has the highest unemployment rate (which seems to only be rising) at 15.2% - higher than even Puerto Rico - it begs the question, how do we fix this!?
There have been many solutions provided from both sides of politics.
As the budget deadline nears, the legislators are under pressure to get Michigan's 2010 Fiscal Year budget planned. Because they need to make up for a$2.2 billion dollar deficit, action needs to be taken in regard to tax cuts, or tax hikes.
Yesterday, Governor Granholm released her proposal for the 2009-10 and 2010 budget resolution. Each year, the governor is required to balance the budget, and at a time of such economic crisis, she has been under a lot of pressure to bring some kind of resolve to our deficit.
Overall, her proposal would raise state revenues to $546.3 million by cutting tax loopholes by up to 12%. She also stated a 12% cut in general fund spending.
The Michigan Policy Network is a student-led public education and research program to report and organize news and information about the political process surrounding Michigan state policy issues. It is run out of the Department of Political Science at Michigan State University, with participation by students from the College of Social Science, the College of Communication, and James Madison College.
The thoughts, opinions, and positions represented herein are solely those of the participating students and in no way represent an official position or policy recommendation of Michigan State University.
Nicholas Biondolillo is tax policy correspondent for the Michigan Policy Network. Nicholas is a first-year student in Engineering at Michigan State University.
