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Tuesday, November 24, 2009
Rep. Smith Introduces $6.5 Billion Tax Plan - Much Aimed At Education
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| LANSING – Michigan taxpayers would be more willing to accept a package of tax increases that solve a variety of state budget problems than they would several small proposals designed to fill only a single year's budget holes, Rep. Alma Wheeler Smith said in introducing a plan that would raise $6.5 billion, much of it targeted to education.
Smith (D-Salem Twp.), gubernatorial candidate, is calling for elimination of some $3 billion in tax expenditures while raising $2 billion from a graduated income tax and $1.5 billion from a sales tax on services. Of those funds, $2 billion would go to the Michigan Future Program, $500 million would restore cuts in the School Aid budget and $500 million would eliminate the surcharge on the Michigan Business Tax.
Michigan Future, Smith said, is a broad education program ranging from preschool programs to a tuition tax credit for college students.
But she said it was also essential to restore the funding for already existing programs. "We currently do not invest in the K-12 School Aid Fund as was projected when Proposal A passed," she said, adding the general fund money needs to be added until a new school aid formula could be developed.
The rest of the money would go to the state general fund to restore money cut from a variety of other programs over the past decade. Smith said she would like to see more funding for mental health programs, but said she would leave final decisions to discussions with the rest of the Legislature.
The key, she said, would be funding programs that would turn the state's fortunes. "With these dollars I hope to see a resurgence," she said. "I want to swing the state around from being one of the poorest to back in the middle of the pack."
While the state would see more revenue, Smith said many residents would see cuts to at least some of the taxes involved. In addition to eliminating the MBT surcharge, the proposal would also cut the sales tax rate to 5.5 percent from the current 6 percent.
And she said the graduated income tax would result in a rate cut for 80 percent of Michigan residents. The tax rates she proposed would be 4 percent for those making $45,000 or less, 7 percent for those between $45,000 and $60,000 and 9.75 percent for those making more than $60,000 (the income levels would double for joint filers).
"Those are the people who can afford to pay a little bit more," she said of the top bracket, noting that she fell within that bracket.
The increase also would be reduced some by the ability to claim it against federal income taxes, she said.
But the brackets also are negotiable as long as the final product raises the target of about $2 billion.
While many tax opponents have argued the state cannot afford any tax increases, Smith said the proposal would still leave the state below the current tax revenue cap set by the Headlee Amendment. The state currently is $9 billion below that cap, she said.
"I think I'll get more support for an increase of this magnitude," she said. "Citizens are tired of the nickel and dime approach. They want to see that the Legislature understands the problems."
Smith has set a deadline for legislative action on her plan of January 30. At that point, if there is not an agreement by all four caucuses, she said she will take the plan directly to the voters.
In any case, she wants to see the income tax change, which would require a constitutional amendment, on the ballot in November. But she said an agreement should not be difficult to reach. "We know where the services tax expansion will probably happen," she said. "We know what tax expenditures can be eliminated."
The sales tax change, she said, will not be reversed this time because it will receive more thought. "It was rushed. It was a very political game," she said of the prior attempt at the tax in 2007. "This will be a very studied, cooperative effort."
TAX WORKGROUP: Smith acknowledged that House Tax Policy Committee Chair Rep. Kate Ebli (D-Monroe) has a workgroup looking at some of the tax changes Ms. Smith has proposed. "I think it's in a holding pattern," she said of the workgroup. "I think we need to be moving forward."
And she laid the blame for that holding pattern on House Speaker Andy Dillon (D-Redford Twp.), who is also mulling a Democratic bid for governor. "I think he's waiting for something," she said. "I don't know what it is."
What it is, Dillon told Gongwer News Service, is a consensus on a tax plan.
While Dillon applauded Smith for putting a proposal on the table, he said the revenue she has projected would not make it through the Legislature.
"I'm pretty sure there's no appetite for that in the Senate," he said.
Dillon said he also has avoided, to this point, putting out any plan of his own or supporting any particular plan. "If it becomes a House Democratic plan, it becomes a political fight," he said. "I'd rather get a consensus."
The plan, in the end, has to have the support of school groups and the business community, as well as other interests, he said. "The only way we're going to see votes in the Legislature is if there's a lot of outside support," he said.
Dillon had hoped to have a proposal on the November 2009 ballot, but he said the business groups were not yet ready to sign on. He is still hoping to have an agreement on some plan shortly after the first of the year.
"If we get too far into next year, the campaigns will impair our ability to do anything significant," he said.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
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Author: Staff Writer
Source:
Gongwer News Service
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