After writing a policy brief explaining all the ins and outs of what Proposal 1 would do in Michigan, James Hohman has spent a lot of time on the phone trying to explain it in simpler terms.
Many of the questions he gets from people opposed to the $500 million tax cut are, ironically, from Tea Party members.
“This proposal cuts taxes and pays for it from the state budget,” Hohman said. “It is a little strange that the main opposition seems to be some Tea Party supporters.”
Proposal 1 will be voted on Tuesday, Aug. 5 and eliminates the “Personal Property Tax” (business equipment tax) for small businesses and phases it out for manufacturers. The state legislature, Republicans and Democrats, almost unanimously supported this change. In fact, there is little official opposition.
Some of this opposition are Tea Party supporters. Here are the three main arguments Hohman has heard followed by his response.
1. A new local authority is set up.
"This authority, the Local Community Stabilization Authority, has no discretionary taxing or borrowing authority and its role is simply to reimburse local governments," Hohman said.
2. This will lead to future tax increase.
"The Legislature always wants to find more money and hike taxes rather than cut spending," Hohman said. "But with a $53 billion state budget and a 10-year phase in, there will be little pressure caused by this tax cut to raise taxes in the future. Economic growth will be far more important and that growth will be bolstered by these new tax exemptions."
3. Confusion about how the proposal is worded and a general distrust of government and politicians.
A distrust of government, in my opinion, is good. And the wording on the proposal certainly should make you skeptical. But citizens are voting for a new authority because that would satisfy local governments’ demand to keep reimbursement revenue out of the state budget while shifting the decrease in tax revenue to future state budgets.
This proposal is remarkably clean. It could have easily been a way to deliver more money to local governments, or provide tax exemptions only to select businesses, or to have been a sneaky tax increase. It does none of those.
For a more in-depth look at the proposal, Hohman’s full analysis is here.
A short video explanation of Proposal 1 of 2014: