The CP Edit: Tax the rich

Tax cut fever is sweeping the State Capitol once again, this time fueled by a $9 billion budget surplus and orchestrated through some deft political chess moves by Gov. Gretchen Whitmer. Clearly aiming to outflank the Republicans on their bread-and-butter issues, Whitmer’s sudden embrace of a tax cut free-for-all is unsurprising, but it’s also disappointing. While the governor’s tax-whacking fervor may be good politics, we think it’s far from good policy.

We believe that taxation, and public subsidies for things like child care and pre-K education, should be based on one’s ability to pay, which depends on one’s income and wealth. It’s called tax equity and fairness. It’s not a new idea or a difficult concept to comprehend. In practice, though, it’s been constant cannon fodder for the internecine partisan warfare that has Republicans and Democrats perpetually trying to outdo the other to curry the favor of enough Michiganders to keep or seize political power.

That said, there’s a lot to like about Whitmer’s pro-working family agenda. We love the Earned Income Tax Credit — renamed the Working Families Tax Credit — because it provides direct tax relief to those who need it most based on their income.

Not so much with the retirement tax rollback approved by the Legislature last week. We’re generally in favor of the plan, but after deeper consideration we think the the version that the Legislature eventually sends to the governor should include means testing. The truth is that retirees as a group are far more financially secure than any other. The Brookings Institution reported that senior citizens age 65 and up are the wealthiest age cohort in the world. Yet, politicians trip over themselves to award them tax cuts when they could be directing those resources to solving intractable poverty, especially among families of color, in cities like Lansing.

We do believe it was unfair for former Gov. Rick Snyder to slap retirees with a wholly unexpected tax on their fixed income after they retired. That should be remedied. But going forward, pension taxes should come with a means test. Someone with a total retirement income of $25,000 annually shouldn’t be taxed at the same rate as someone who hauls in $100,000, or who has a pension and income from a second career that pushes their total yearly income to six figures.

Then there’s the small detail that the state’s whopping budget surplus is about to trigger an automatic income tax rollback, another bit of Republican trickery from a few yearsback. As reported by Bridge Magazine (see Page 7), House Appropriations Chair Angela Witwer of Delta Township said her fellow Democrats haven’t talked about blocking the cut, which she described as “political suicide.” Here, too, we think the new Democratic majority should slam the brakes on the rollback — which nonparitsan legislative sources say could knock it down from 4.25% to as little as 4.05% — and consider how this moment can be leveraged to create a more fair and progressive system of taxation for all Michiganders, starting with considering the bold call by another member of the local delegation, Julie Brixie, for a graduated plan.

Adding insult to working-class injury, an unfortunate Court of Appeals ruling last week means that minimum wage and tipped workers won’t be getting the raise they were expecting later this month. Michigan voters in 2018 approved a ballot measure that bumped up the minimum wage from $10.10 per hour to $13.03 —a 29% increase. Tipped workers, meaning restaurant personnel who make a base wage of just $3.75, would have seen their base more than triple to $11.73 per hour. These long-overdue raises for minimum wage workers would take effect on Feb. 19 but for another cynical Republican maneuver, whereby the voter-approved proposal was subsequently amended by the Legislature, elevating partisan chicanery over the will of the people as clearly expressed at the polls.

Finally, we’re all for every 4-year-old getting a strong start on their education journey by enrolling in pre-K. Yet we are wholly against using state resources to subsidize pre-K for families who can already afford it. And how about subsidized child care for everyone with no income limits? This, too, smacks of political opportunism rather than a principled policy. Simply put, we’re not in favor of tax cuts and subsidized services for the rich. We support tax equity, and that means wealthy people and companies paying their fair share.

We get the governor’s strategy. As usual, she’s thinking two steps ahead of the discombobulated Republicans and positioning her party to maintain or even expand its majority less than two years from now. And, given the history of the income tax, especially the time when two Democratic state senators were recalled from office for voting to increase it, handing control of the Michigan Senate to Republicans for the next four decades, we know there is zero chance that Dems will support anything resembling a tax increase.

OK, so be it. But that doesn’t mean everyone needs or should get a tax cut. WIth many economists predicting a recession, we think it unwise to blow future holes in the state budget. Our counsel to state lawmakers and the governor is this: At a generational moment in Michigan’s history, led by a new Democratic majority for the first time in four decades, let’s use that power to create a fair and equitable system of taxation that benefits low- and middle-income families and eschews public subsidies for the wealthy.