Legislator calls for moving up scheduled income tax cut


MCT News Service

LANSING — With $300 million in extra revenue, House Speaker Jase Bolger says the state can afford to move up a scheduled cut in the personal income tax to this year.

“The state budget is much improved, and that’s not our revenue,” Bolger, R-Marshall, told the Detroit Free Press in an interview Friday. “Those are taxpayers’ dollars, and they deserve to get some of them back.”

Bolger said he wants to start the 0.1 percent cut in the personal income tax rate that is due to take effect Jan. 1 — moving the rate down from 4.35 percent to 4.25 percent — as early as this summer.

Moving up the tax cut six months, so it takes effect July 1, would cost the state about $96 million while putting only about $23 more in the pocket of a taxpayer who is paid $50,000, state officials said Friday.

But Bolger said he and his caucus are working on plans for additional cuts to the personal income tax rate and increases to the personal exemptions, to start in 2013 and beyond. He said he hopes to describe the plans next week.

House Minority Floor Leader Kate Segal, D-Battle Creek, dismissed talk of a tax cut as “a political move” designed to improve GOP chances in November. She said middle-class voters will remember the Republican-controlled Legislature’s earlier decisions to tax pensions and cut personal income tax credits.

Bolger denied the Nov. 6 election is a factor in his desire to accelerate the tax cut.

The GOP holds a 64-46 edge in the House, but Democrats hope to cut that majority or even take control. Republicans also control the state Senate, but senators don’t have an election until 2014.

At a conference Wednesday, state officials said projected revenue for 2012 and 2013 is $300 million more than was estimated at the last such meeting in January. The higher numbers result from a combination of increased income and sales tax collections and lower expenditures for Medicaid and welfare.

The improved numbers continue a trend as Michigan climbs out of the protracted recession.

Bolger said personal tax relief is at the top of a four-item list House Republicans want to address as they work to complete the budget by June 1. The other three items are boosting the amounts the state puts aside in savings accounts such as the Budget Stabilization Fund, reducing debt and getting more money into K-12 classrooms.

Kurt Weiss, a spokesman for Budget Director John Nixon, wouldn’t say whether the administration supports an accelerated tax cut but confirmed it “is one of the items being discussed.”

Bolger said he wants about $500 million set aside in funds such as the Budget Stabilization Fund, also known as the Rainy Day Fund. That was down to $2.2 million when Gov. Rick Snyder took office, but is forecast to reach $365 million this year.

Debt retirement will focus on reducing a $45-billion unfunded liability in the Michigan Public School Employees Retirement System, Bolger said. That could involve moving new school employees to a 401(k)-style retirement system, as the state Senate proposed in legislation it passed last week, or prefunding retirement health care, Bolger said.

Reducing the amounts needed to fund teacher retirement benefits will increase the amounts available to spend in classrooms, he said.

Business got a tax cut of nearly $1.8 billion as a result of Snyder’s first budget, which eliminated the Michigan Business Tax and replaced it with a corporate income tax that is not applied to most businesses. He and the Legislature also increased taxes on pension income and reduced certain personal tax credits and deductions. Officials said Wednesday that individuals will pay about $1.4 billion more in taxes in 2013 than they did in 2012.

Segal said the Legislature’s top priorities should be repealing the pension tax and restoring cuts to K-12 education that Snyder and lawmakers approved in 2011.



Posted by Tribune News Services

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