by Gongwer News Service
January 19, 2009

While House Speaker Andy Dillon’s surprisingly forthright call a week ago to restructure taxes was met with much enthusiasm from both parties, the question now becomes whether the House will actually act.

The Redford Township Democrat proposed a constitutional amendment that, while vague in details, would possibly change the structure of the income tax and reduce property tax rates.

With uncharacteristic emotion during his acceptance speech after he was again sworn in as speaker, Mr. Dillon said rising property taxes at a time when home values are declining are forcing too many of his neighbors into foreclosure.

He said opening up the Constitution is the only way to enact “meaningful tax reform.”

The speaker also went after the much-maligned 22-percent surcharge on the Michigan Business Tax, calling on the House to “aggressively” work on eliminating the surcharge.

Echoing statements business groups have made since the surcharge’s inception in 2007, the speaker said the charge stifles business and that a new proposal should be revenue neutral or could even produce a tax cut.

While Mr. Dillon’s speech drew applause from his peers, Senate Majority Leader Mike Bishop (R-Rochester) didn’t seem impressed. Mr. Bishop’s spokesperson, Matt Marsden, criticized the House for holding up a Senate bill last session that would have repealed the surcharge.

He also said lawmakers don’t need a ballot initiative to deal with the myriad of tax issues before them and, in fact, should fix problems now instead of waiting two years for a ballot initiative to go in front of voters in the next general election.

Mr. Dillon, in interviews a week ago, gave a glimpse of one reason House members haven’t acted on the surcharge and on other tax issues that could lower revenues, saying that any tax cuts have to be made in consideration of the state’s negative economic outlook.

Any worries House members had last year about revenue shortages were most certainly multiplied after the recent revenue estimating conference that predicted the state will end the year $1.4 billion in debt without increased revenue or cuts.

But action remains the name of the game in the Senate, where tax bills have dominated the roster. The first bill introduced, in fact, is legislation that would repeal the surcharge.

While the governor has said she will work with both chambers to reform the tax structure, she hasn’t given indications about whether she will call for immediate action on any of the issues.

Federal Stimulus Update
Preliminary indications about U. S. House Democrats’ plans for an $825-billion economic stimulus bill were encouraging, but officials in the administration of Governor Jennifer Granholm wanted to see full details of the bill before they could say what the benefit to Michigan could be.

They also cautioned releasing the measure from the U.S. House Appropriations Committee is a first step in the process before a bill becomes law. As now expected, the U.S. Senate will vote first on a stimulus bill and officials hope the U.S. House will follow by February 13.

Officials are hopeful the federal bill will help keep the state’s budget in balance. Even so, Ms. Granholm and administration officials have said repeatedly that there will be significant cuts in the budget.

Ms. Granholm’s 2009-10 budget to the legislature, which she expects to release days before the U.S. House vote, won’t account for federal money or infrastructure investments that may be necessary to get federal dollars, because of the timeline.

While the recent revenue estimating conference brought gloomy indications about the economy, budget executives said reports about the possible benefits of a federal stimulus bill were welcome news.

Spending areas the bill outlines that could prove beneficial to the state include $2 billion for research and development of advanced battery technology for vehicles (the state has had two major announcements in the last two weeks about advanced battery development, and Ms. Granholm signed a bill last Wednesday granting tax breaks for battery research and development); $600 million to replace older vehicles in the federal fleet with alternative fuel vehicles (and most of those vehicles purchased will be U.S.-manufactured cars); $200 million for development of electric vehicles; $30 billion nationwide in road and bridge construction and repair; $20 billion nationwide in school construction; $6 billion to expand development of wireless and broadband connections in rural areas; and $4 billion in worker training grants.

In addition the bill would allocate an estimated $27 billion to extend unemployment benefits for 33 weeks, essentially through the end of 2009, and another $9 billion to boost the average benefit by $25 a week.

Though most news about the bill points to help for the state, officials refused to put all of their eggs in that basket, saying they had not yet had a chance to review the 258-page proposed bill for details. Without that review it was impossible to say what the bill could mean for the budget, or for spending on infrastructure projects.

In an effort to hit the ground running when a federal stimulus proposal to boost infrastructure projects is finally approved, the governor’s office has implemented a planning structure that includes the formation of five working groups, which make up the “Economic Stimulus for Jobs Planning Team.”

“While the precise amount of Michigan’s share of these funds is not yet known, federal funds could come as early as mid-February. It is therefore critical that Michigan be prepared to maximize its use of these expenditures with equally deliberate speed,” said documents from Ms. Granholm’s office.

The groups, which began meeting on January 8, will meet weekly and then report to Ms. Granholm by the end of the month with strategic action plans to have the state ready for the stimulus bill.

The workgroup effort is aimed at one anticipated thrust of the stimulus package: infrastructure development. The stimulus package is also expected to deal with direct expenditures to the states to help them keep their budgets balanced, tax cuts to individuals and expanded unemployment benefits.

Ms. Granholm’s Washington affairs office is also playing a major role in helping coordinate the work as well as keeping all officials informed about developments in the drafting and passage of the stimulus package.

For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.