Bad Policy, Good Politics
March 10, 2017
The dramatic collapse of the Michigan income tax cut last month really was something to behold.
In their first big policy push of the new term, the House Republican leadership announced what looked like a surefire winner to (gradually) scrap the state’s income tax, a longtime priority of groups like the Mackinac Center for Public Policy and Americans for Prosperity.
Conservative bitterness over the tax rate stems from the 2007 government shutdown when the state was staring down an almost $2 billion deficit. Then-Senate Majority Leader Mike Bishop (R-Rochester), who’s now a congressman, agreed to a deal with Gov. Jennifer Granholm to temporarily up the 3.9-percent income tax rate to 4.35 percent.
The tax rate was supposed to roll back, but it never fully did. That’s because in his first year in office in 2011, Gov. Rick Snyder had bigger plans for the tax code. He wanted to cut business taxes by $2 billion a year. One of the ways he paid for that was to keep the income tax at 4.35 percent for the first year and then freeze it at 4.25 percent thereafter.
That was a hard pill for the Republican right flank to swallow.
So to kick off 2017, new House Speaker Tom Leonard (R-DeWitt) and his team hatched their plan to whittle down the income tax to nothing over the course of 40 years. This had the added benefit of giving the GOP something to run on in 2018, which they know could be a rough Republican year if President Trump’s approval ratings keep dropping.
Their messaging was simple and effective for voters.
“This is the people’s money, not ours,” Leonard declared in a January press release announcing the plan.
But things quickly skidded downhill from there. Snyder let his displeasure over the tax cut be known. Senate Majority Leader Arlan Meekhof (R-West Olive) wasn’t exactly enthusiastic, either.
It soon became clear that a majority in the lower chamber wouldn’t sign off on killing the tax completely, so it was retooled as a partial rollback.
However, that didn’t solve the huge stumbling block of the first-year $1.1 billion sock to the budget, which several Republicans worried would hit education and infrastructure particularly hard. And future tax projections are running so red that they look like they’re ripped out of a horror movie.
Republicans have controlled everything in Michigan state government for the last six years. But as all comic book geeks know, with great power also comes great responsibility. And that means that it’s completely on the GOP to balance the state’s $55 billion budget (unlike the feds, we can’t run a deficit).
Chopping more than $1 billion from the budget would probably mean worse schools and roads (which voters probably wouldn’t understand after being slapped with huge gas tax and fee hikes). So 12 Republican representatives refused to walk the plank, which torpedoed the bill during a late-night session, a rarity this early on in the year.
Leonard took his share of slings and arrows for putting up the bill without having the votes. But it’s doubtful that too many voters will remember that rookie move when 2018 rolls around. (I took a lot of grief from politicos when I wrote that the Todd Courser-Cindy Gamrat sex scandal would have zero impact on the 2016 election. But I turned out to be correct, as nobody cared once Trump barreled onto the political stage).
Leonard is also doing a juggling act between leading his caucus and looking ahead to next year when he’s term-limited. He’s interested in running for attorney general, which means he has to be nominated at the state GOP convention that’s dominated by conservative activists. Needless to say, the speaker’s hard line on taxes will be wildly popular with them.
And despite this initial setback, I don’t believe the income tax cut is dead this term. Some may be being lulled into a false sense of security.
Don’t forget that Sen. Jack Brandenburg (R-Harrison Twp.) has been working on his own plan. This isn’t a new cause for the Macomb County small businessman, who was a vocal “no” vote in the House during the ‘07 increase. Anyone who knows Brandenburg knows he’s never going to give up.
And consider this scenario. Let’s say that a Democrat is elected governor in 2018, which even many Republicans acknowledge is a decent possibility.
It’s easy to see the GOP-controlled Legislature mustering up enough votes in lame duck to slash the income tax. That way, they can brag to their constituents in the next election that they fought to put more money in their pockets.
And the best part is they can stick the next governor with the bill.
Let the Democrat figure out how to pay for their tax cut. If s/he struggles to do so, Republicans can argue it’s clearly a case of liberal economic incompetence (like we got from Granholm for eight years). And if the new governor wants to get rid of the tax cut, s/he’s a typical liberal tax hiker.
Sure, that would all be wildly fiscally irresponsible. But why let good policy get in the way of good politics?