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House GOP scales back income tax cut plan

LANSING, Mich. (AP) — Michigan House Republicans on Tuesday significantly revised their income tax cut plan, proposing to drop the 4.25 percent rate to 3.9 percent over four years and no longer calling for the tax to be phased out entirely over decades.

Legislation that cleared a committee last week would have cut the tax to 3.9 percent in 2018, saving taxpayers $680 million in the next fiscal year and $1.1 billion the following year, according to the nonpartisan House Fiscal Agency. The bill also would have eliminated the tax by 2057.

Under the new version — which Republican Gov. Rick Snyder remains concerned about for budget reasons — the tax would drop by one-tenth of a percentage point annually from 2018 through 2020 and then 0.05 percentage points in 2021, a slower return to the 3.9 percent rate that was in effect in 2007. An existing law that provides for potential year reductions starting in 2023 — if general funds outplace inflation by a minimum amount — would stay intact.

A final vote was not taken, an indication that the proposal may not yet have had enough support to pass the House and go to the GOP-led Senate. The House could vote as early as Wednesday, however.

Snyder issued a statement Tuesday night saying he appreciates that House leaders took seriously his concerns, “but I still have a billion dollars’ worth of concerns because there has been no plan presented as to how this will affect 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,” the statement said. “I’d like to see a public plan as to how this will be paid for before I can lend my support to the new proposal.”

The bill sponsor, Republican Rep. Lee Chatfield of Levering, said the revisions are “about what’s simple vs. what’s complicated. We believe the solution that’s put before us … achieves the simple goal of providing tax relief across the state.” He questioned the “presupposition” that reducing “work taxes” would hurt the budget.

“I think this is a great way to grow our economy,” Chatfield said.

The House Fiscal Agency estimated that the bill now would cut revenue in the $10.5 billion general fund by $195 million in the next budget, growing to a $1.1 billion reduction in the 2021-22 fiscal year when fully implemented.

Before the changes were made, more than half of Michigan’s 15 university presidents lobbied against the legislation outside the House chamber. State support for the schools is down $363 million, or nearly 19 percent, from 15 years ago. Average tuition costs were sixth-highest in the country last year, according to the Michigan League for Public Policy.

“Our fear is that if the resources available to state government are constrained by such a large tax cut, we won’t be able to maintain accessibility to a great public higher education at the same costs now. Families are already struggling to pay for college, and we don’t want to make those challenges greater,” said University of Michigan-Ann Arbor President Mark Schlissel. He urged lawmakers to “slow down” and fully consider the consequence of a tax cut that would “have a profound and adverse impact on our state’s future.”

Democrats unsuccessfully tried to amend the bill to keep the tax at 4.25 percent for people making more than $70,000 or to move to a different type of graduated income tax.

Earlier Tuesday, Snyder noted at a Michigan Farm Bureau that as part of laws that raised fuel taxes and vehicle registration fees to improve roads and bridges, $600 million annually will eventually be shifted from the general fund toward transportation and homeowners and renters will get $200 million in tax relief a year. He said the current “one-time” budget surplus should instead be put into savings.

“I’m not sure where you get a billion dollars a year in the next year or the next several years without making huge cuts to things,” Snyder said.

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