Senate Heart in Right Place, Execution Worrisome

Examining the future of road funding and income tax cuts

Since the colossal failure of Proposal 1, the state House and state Senate have each released road funding proposals of their own. We now have a debate bounded by two high profile proposals, each with components worthy of applause.

We have written much about both plans but feel compelled to linger over one component in the Senate plan: the income tax cuts.

The Senate plan basically allows for a rollback in personal income taxes every year state revenues exceed inflation. Theoretically at least that means that what we pay in income taxes could drop to zero or near zero over time. This is a commendable goal. (If you’re wondering where the state would get money for its operations, don’t worry; there would still be sales, excise taxes and other sources of revenue.)

The qualification we must offer is that past legislatures also have made promises of future tax cuts, only to prevent them from occurring. One need look back no further than 2007 for an example.

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That year, the Granholm administration and the Legislature conspired to raise the personal income tax by 11.5 percent. That increase came with the promise that — in 2011, when the state was expected to be on firmer fiscal footing — Lansing would begin rolling back the tax hike. The rollback never really came to pass. Then the Snyder administration, after cutting the personal income tax by a grudging 0.1 percentage point, prevented more of those promised cuts from occurring.

There are all sorts of ways Lansing politicians could undermine the promise of future income tax cuts. Take for instance the point made by David Zin of the Senate Fiscal Agency. He argued — and was cited by the Gongwer News Service — that any money lawmakers transfer to the state’s rainy day fund from the General Fund wouldn’t count in the calculation of how much the General Fund had grown. Legislators who wished to forestall an income tax cut could simply transfer the cash to the rainy day fund.

There are better and simpler ideas. Why not simply mandate a rollback in the personal income tax rate immediately instead of installing a complex tax-cut formula that may never actually produce a tax cut?

Or the Legislature could link the gas tax increase in the road plan to the proposed personal income tax cuts. That is, if a personal income tax cut does not occur then any road tax increase is reversed. Linking the two might help assure voters that Lansing lawmakers are serious about tax relief and road repair.

Another idea — though more challenging and time consuming — is to enshrine personal income tax cuts in the state constitution, along with the necessary prohibitions on raiding dollars that flow to the treasury faster than, say, a combination of population growth and the inflation rate.

I congratulate each chamber of the Legislature for developing boundary lines in the debate over road finance. Their plans reveal some very good intentions, but more can be done to win back the trust of taxpayers who ultimately foot the road bill.

If this Legislature could prove to taxpayers that its proposed tax cuts are real, maybe Michigan voters will accept its road funding ideas as passionately as they rejected the tax hike offered by Proposal 1.


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