DALLAS – The Republican-controlled Michigan House of Representatives voted down legislation that would have rolled back the state income tax.
The revised House Bill 4001 was voted down in a 52 to 55 vote early Thursday after hours of debate. A total of 11 Republicans crossed party lines to vote against the GOP-sponsored proposal.
House Speaker Tom Leonard, R-DeWitt Township, called the vote "unfortunate."
"We wanted to produce legislation that was going to bring income tax relief to the hardworking taxpayers of this state," said Leonard.
Leonard said that he expected the legislation would fail however an overwhelming majority in his caucus "wanted to let the world know where they stood," he said.
Republicans had already watered down the bill from an earlier version that called for an outright elimination of the tax over time.
HB 4001, sponsored by State Rep. Lee Chatfield, R-Levering, originally proposed to reduce the income tax rate 0.1 % every year after 2018 until eliminated. The plan also aimed to lower personal income tax rate to 3.9% in 2018 from the current 4.25%.
The proposal would have reduced net income tax revenue by $680 million in fiscal 2018 and $1.12 billion in fiscal 2019. The incremental 0.1 % personal income tax decreases in subsequent fiscal years would trim revenues by roughly $400 million per year.
Pushback from Democrats and Gov. Rick Snyder, a Republican, led to revisions. The new version proposed to drop the rate from 4.25% to 3.9% over four years but only if the state's rainy day fund held more than $1 billion by 2020. The plan no longer called for the tax to be phased out entirely.
The lost revenue would have totaled $195 million in the first year; $463 million in the second year; $780 million in the third year, and $1.1 billion in the fourth year.
"Our top priority was that we delivered the promise to 3.9% and we made certain that this legislation would have been done in a very responsible way," said Leonard. "It would have ensured that $1 billion stayed in the rainy day fund."
"We've been saying all along that the goal was reducing it to 3.9%," said Gideon D'Assandro, spokesman for the majority House Republicans. "When the tax was raised in 2007, legislators and Gov. Jennifer Granholm promised that it would be reduced after the recession, but that promise was broken. This version kept that promise without including all the other stuff. It is a simpler way to get to the same goal."
Despite the changes to the legislation, Snyder continued to express concerns over the long-term impact of the proposal on residents and their communities statewide.
"Half of a billion dollars will come due in 2019 and over one billion by 2022, years in which we have planned funding specifically to invest in modernizing our state's infrastructure," said Snyder.
State Sen. Jack Brandenburg, R-Harrison Township, is also is working on legislation to eliminate income taxes. Senate Bill 4 would reduce the rate to 4.25% beginning in 2018 and reduce the rate 1 percent each year until the rate is zero.
