Whitmer downplays reported business tax dealmaking in budget

By: - March 6, 2019 10:27 pm

Gov. Gretchen Whitmer, Feb. 4, 2019 | Nick Manes

Gov. Gretchen Whitmer says her first budget proposal represents a “real solution” and now the negotiation process can begin.

On Tuesday night, Crain’s Detroit reported that Whitmer has told business leaders they can “work against” her proposal to raise the 4.25 percent tax rate on S-corporations and other small businesses to 6 percent in exchange for working to get votes for the 45-cent gas tax hike she wants to repair roads.

Asked by the Advance on Wednesday whether she views the business tax hike as a bargaining chip to get the gas tax, the governor sought to somewhat downplay that notion.

“So I don’t know about that,” Whitmer told the Advance, following a closed-door meeting with West Michigan business leaders at the office of the Grand Rapids Area Chamber of Commerce.  

“I put a real solution on the table [and] I think that the business community has actually been pretty warmly receiving the budget,” Whitmer said, noting that the budget provides funding for workforce development to “close the skills gap,” as well as infrastructure.

Both represent key priorities for the state’s business community.

“So I think we’re going to be able to build a really great coalition here,” Whitmer said.

She added that the goal of the budget proposal is to “start with a solution … and then the negotiations begin, so I think everything gets negotiated from here on out.”

Whitmer spokeswoman Tiffany Brown told the Advance that Whitmer’s proposals are the “first step in the budget negotiation process,” and that the governor “is willing to work with anyone who is willing to work with her on solutions” to garner $2.5 billion in annual revenue experts say is necessary for roads.

As the Advance has reported, Whitmer’s $60.2 billion budget proposal contains some tax increases, such as the gas tax and business taxes, coupled with offsetting measures like repealing the so-called pension tax and doubling the Earned Income Tax Credit for low-income people.

While Whitmer may be willing to kill the business tax increases in exchange for votes on the gas tax, both proposals have garnered disdain from the GOP-controlled Legislature.

Speaker Lee Chatfield and Lt. Gov. Garlin Gilchrist at Mayor Mike Duggan’s State of the City address | Ken Coleman

As the Advance reported on Tuesday night, Republicans in both the House and Senate largely came out opposed to Whitmer’s proposals, while Democrats praised several components, but mostly stayed quiet on the call to almost triple the gas tax.

Republicans like state House Speaker Lee Chatfield (R-Levering) said Whitmer should have talked about auto insurance reform in her budget presentation. He later attended the State of the City speech from Detroit Mayor Mike Duggan, who made a strong push for lowering auto insurance rates.

The idea of a “grand bargain” — trading a no-fault overhaul for a roads solution — has some currency in Lansing, although the logistics would be tricky.

On Wednesday, state Senate Majority Leader Mike Shirkey (R-Clarklake) also slammed the gas and business tax increases while speaking with reporters, according to the Associated Press.

“I’m going to say this as gently as I possibly can: Taking actions like that would be doubling down on stupid,” Shirkey reportedly said regarding the gas tax proposal.

Mike Shirkey | Michael Gerstein

The business community’s take, however, has been fairly split, with many groups praising the road proposal and slamming the business taxes.

Brian Calley, president of the Small Business Association of Michigan, panned Whitmer’s proposed business tax hikes. As lieutenant governor under former Gov. Rick Snyder, he spearheaded the push for the 2011 business tax.

He said Whitmer’s plan “singles out smaller companies that have been essential to our economic resurgence and will “undo our economic growth. We should be sending small businesses a thank you note, not a substantially higher tax bill.”

The Whitmer administration contends that the proposal creates “parity” with other businesses by taxing them at an equal level.

Gov. Gretchen Whitmer and Budget Director Chris Kolb at the Fiscal Year 2020 budget presentation | Casey Hull

The budget negotiation process is only just beginning and will continue into the spring and likely beyond. Whitmer continued to express optimism that naysaying legislators will come around to her position that a 45-cent gas tax is the most realistic solution to raise road revenue.

“I know it’s jarring for some people — but when we’re used to politicians telling us what we want to hear instead of doing what needs to be done — the reality check is hard,” Whitmer told reporters. “But we’re going to get this done, we’re going to get through it, and we’re going to make Michigan a place where you’re safe on the roads.”

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Nick Manes
Nick Manes

Nick Manes is a former Michigan Advance reporter, covering West Michigan, business and labor, health care and the safety net. He previously spent six years as a reporter at MiBiz covering commercial real estate, economic development and all manner of public policy at the local and state levels.