Rush to cut taxes may have a cost
The law of unintended consequences could have unintended benefits for Michigan taxpayers. The Congress passed and the president signed the Republican tax reform bill, they accidentally gave the state of Michigan a $1.5 billion windfall by making more of Michiganders’ income taxable.
When taxpayers fill out their Michigan income tax forms, they calculate the tax owed based on the number of exemptions claimed on their federal income taxes. But the GOP tax plan eliminates the personal exemption, effectively raising every Michigan filer’s taxable income by $4,050.
But this is an election year, and state lawmakers were not going to raise taxes — even if they could blame them on someone else in Washington, D.C. Gov. Rick Snyder proposed a simple fix — instead of basing the number of exemptions on what taxpayers claim on the federal form, put the exemption check boxes on the state form and restore the personal exemption that way.
That is, by the way, Port Huron’s city income tax form works. Exemptions are not linked to the number on the federal form.
But because it is an election year, that was not good enough for the Legislature. Lawmakers keep growing the personal exemption beyond the initial $4,050 problem. Competing proposals could have it grow to up to $5,000 by 2021 if the Senate gets its way or $4,800 if a House plan prevails. House Republicans have thrown in a $100 tax credit for senior citizens and another proposal would hand out a child care tax credit.
They are Republican plans but Democrats seem willing to go along.
They should. We should get to keep our money.
Except Lansing won’t get to keep its other promises if it goes broke. We still haven’t figured out where the $600 million in general fund dollars for road repairs is coming from. The federal tax cut windfall is probably the only one Lansing was going to see any time soon. Analysts don’t expect much growth in state tax revenues.
All that makes giving up $300 million or more in tax cuts risky.
Snyder consistently has acted like one of those old-style Republicans who dislike fiscal irresponsibility even more than they dislike taxes. He has opposed and vetoed his party colleagues’ spend-thrifty ways. That ended Wednesday, though, when lawmakers were able to overturn one of his vetoes for the first time, approving a tax break for car buyers that Snyder said the state couldn’t afford.
Snyder said, “Changing the tax code without a plan to pay for it challenges the conservative fiscal responsibility of the past seven years.” The consequences, he warned, could imperil the state’s economic comeback.
— Times Herald (Port Huron)