Michigan Capitol | Susan J. Demas
A $2.5 billion tax relief plan put forward by the Republican-led Legislature drew out the veto pen Friday from Michigan Democratic Gov. Gretchen Whitmer, who said it would “blow a recurring, multi-billion-dollar hole in basic state government functions from public safety to potholes.”
In returning Senate Bill 768, Whitmer said she was doing so at the behest of leaders “in business, education, public safety, and mayors across our state” who “requested a veto because of the damage these proposals would do.”
Sponsored by state Sen. Aric Nesbitt (R-Lawton), it sought to cut Michigan’s individual income tax rate from 4.25% to 3.9% and create a $500 tax credit for each child under the age of 19. It would also have increased the tax exemption for seniors up to $40,000 for individuals and $80,000 for couples, while lowering the qualifying age threshold for a tax exemption from 67 to 62.
However, an analysis from the nonpartisan Senate Fiscal Agency determined the bill would “reduce revenue to the General Fund and School Aid Fund (SAF) by approximately $1.38 billion in fiscal year (FY) 2022, $2.87 billion in FY 2023, and $2.52 billion in FY 2024.” The analysis added that the “revenue loss would increase in later years as the economy continues to grow and population demographics increase the number of individuals covered by the bill’s provisions.”
In her veto letter, Whitmer said those reductions would result in “deep and painful cuts to services,” including “layoffs of cops and firefighters, and kneecap our ability to keep fixing crumbling roads.”
Unsurprisingly, Speaker of the House Jason Wentworth (R-Clare) saw it differently, accusing Whitmer of being amenable to tax cuts when she speaks to the public, while “behind the scenes she’s doing everything she can to keep money out of the pockets of Michigan families and kill any chance they have of seeing relief,” he said. “This plan would have cut taxes for every single taxpayer in the state and provided bonus help to seniors and families with children. It did everything the governor promised she would do. But at the end of the day, she just couldn’t get herself to give that money back to the taxpayers who deserve it.”
Whitmer, however, rejected that interpretation, noting that in her executive budget recommendation, she proposed rolling back the Retirement Tax so that 500,000 households could save an average of $1,000 per year while tripling the Earned Income Tax Credit, providing a nearly $3,000 tax refund for 730,000 Michiganders. In addition, she said that $400 refund checks per vehicle are in the process of being sent out right now as a result of the 2019 bipartisan auto insurance reform effort. “These plans will make a real difference for people who are struggling the most right now to afford essentials,” said Whitmer. “That’s not lip service, that’s real relief, right now.”
Whitmer also rejected HB 5570, which would have suspended the state’s 27-cent-per-gallon gas tax for six months. Noting it would not take effect until 2023, Whitmer called it a “misguided proposal (that) does nothing for Michiganders facing pain at the pump right now.” She also claimed it would kill 35,000 construction jobs, “handicapping our ongoing work to fix roads and bridges as construction season ramps up and we are all focused on getting Michiganders back to work.”
The bill was sponsored by Rep. Steve Johnson (R-Wayland), who previously said it would have what he called “an incredible impact” on “the poorest among us” and urged that the bill will provide relief to “those struggling to make ends meet.”
That result was less than clear in an analysis from the nonpartisan House Fiscal Agency, which predicted a reduction of $725 million in gas tax collection but added that “there is no way to know if the consumer is actually receiving all or any part of the benefit.”
Rep. Matt Hall (R-Marshall), chair of the House Tax Policy Committee, said the vetoes “struck down hope for countless people who have seen inflation eat away at their finances. They’ll continue to see higher prices at the grocery store, gas station, pharmacy and elsewhere that are unsustainable to their own budgets – all while she worries about the sustainability of her own tax-and-spend initiatives that would be disrupted by allowing people to keep more of what they earn,” he said.
But not everyone saw it in such black and white terms. Advocacy groups People First Economy and Prosperity Michigan issued a release in response to the vetoes, saying that voters and small businesses in the state “want to see cooperation, not competition, when it comes to negotiating tax cuts that can benefit all Michiganders.”
Hanna Schulze, president of People First Economy, a nonprofit that describes itself as leading “the development of an economy grounded in local ownership that meets the basic needs of people,” said that while the businesses they represent certainly would appreciate some type of relief, “they want to make sure that tax relief is smart and done in a way that’s sustainable over time so that deep budget cuts to the communities where they do business aren’t needed down the road.”
That was echoed by Hugh Madden, executive director of Prosperity Michigan, another nonprofit that says it seeks to create a tax structure that “levels the playing field and ensures Michigan’s wealthiest and big corporations pay their fair share so we can invest in the infrastructure we rely on everyday.” Madden said that while Whitmer “was right to veto this short-sighted tax giveaway,” he said Michigan’s “unique” budget situation “will require cooperation on both sides of the aisle to craft a sound plan and not just gimmick after gimmick in an election year.”
Whitmer also vetoed a third bill on Friday.
SB 11, introduced by Sen. Lana Theis (R-Brighton), would have required county clerks to issue and renew concealed pistol licenses regardless of any shutdown issued by executive or public health order.
The governor said the bill “would jeopardize Michigan clerks” while also requiring “law enforcement agencies to prioritize the issuance of concealed carry permits—even when that would be a poor use of resources during an emergency.”
Theis said while she was “disappointed” by the veto, she could not say she was shocked. “She has never supported gun owners and she likely never will,”said Theis. “I hope responsible gun owners will continue their efforts to protect this right. I certainly will.”
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