Waiting for Gov. Gretchen Whitmer and the Republican-led Legislature to announce some large tax cut, a $500 rebate, a gas tax holiday or some other substantive tax cut anytime soon?
Don’t hold your breath.
It isn’t coming until after Nov. 8, more than likely early 2023. Let me tell you why.
Michigan has $7 billion on the balance sheet. First of all, that’s never happened before. Second, that’s the equivalent of everything the state government spends every year out of the General Fund, absent the Department of Health and Human Services budget and education.
State Police, prisons, environmental quality, roads, agriculture, the Legislature, all of it. Add it all up, and you get $7 billion. That’s what the state government is sitting on.
Most of the extra money came directly from the federal government in response to COVID-19, hoping to get the economy back on track. Most of the rest came from people making more or spending more money due to the COVID money sent from Washington.
People with jobs are making money and spending more money. That’s more state government money from income and sales taxes.
You’re not alone in thinking taxpayers should get a little of that back. Whitmer, Democrats and Republicans agree on that. The issue: Who is getting money and how much?
Republicans and Democrats can’t agree on that.
Whitmer wants to increase the Earned Income Tax Credit, an automatic tax write-off received by lower-income people. She also wanted to shield retirement income from the state income tax.
Republicans have a much bigger vision. They want to cut the income tax from 4.25% to 3.9%, the rate from the Gov. John Engler-era. They also want to increase the per-child income tax write-off by $500, give disabled veterans a property tax exemption, suspend the gas tax (when gas was $5 a gallon) and maybe provide some businesses with a tax cut.
Senate Minority Leader Jim Ananich suggested suspending the sales tax collected on gasoline. Whitmer came back with the idea of giving Michigan taxpayers a $500 rebate check.
Clearly, there’s no shortage of ideas. The money is there. Why can’t they agree on something?
In a word: politics.
Whitmer didn’t sign the expansive tax cut bill the Republican-led House and Senate threw on her desk earlier this summer. Why? Because the state couldn’t afford it after the $7 billion is gone. If Whitmer returns next term, she would either be forced to raise taxes again or make heavy spending cuts by 2024 or 2025. She doesn’t want to do either.
Republicans figured she’d veto the tax cut. Since she did, they can call her out on it during her reelection campaign. On Monday, the Senate Republicans did exactly that on Twitter.
The GOP Legislature could have sent Whitmer something she would have signed, like the $500 rebate. But they know Whitmer would have immediately taken credit for it.
The governor hasn’t stopped crowing about the $400 rebate check she gave auto insurance customers earlier this year. Senate Majority Leader Mike Shirkey and House Speaker Jason Wentworth won’t allow her to take credit for another giveback until after the election.
Also, both sides are looking ahead. If the Democrats take control of the Legislature in November, Whitmer will have more opportunities to spend the $7 billion as she wants. She won’t need to negotiate with Republicans, who would inevitably insist on something she’s not crazy about.
Same thing with the Republicans. If nominee Tudor Dixon wins, she has promised to cut the income tax, which they want.
Honestly, there’s no incentive for anyone to do anything with the $7 billion. Gas is back under $4 a gallon. That’s a hell of a lot better than over $5.
So, the extra $7 billion sits. We can all see it through bulletproof glass. We know it’s there. But we can’t touch it … for now.
(Email Kyle Melinn of the Capitol news services MIRS at email@example.com.)
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