Steve Liedel of the Dykema law firm made two fundamental legal errors when he was interviewed on this week’s MIRS Monday podcast.
In a discussion of Gov. Whitmer’s response to an automatic income tax rollback that could be triggered this year, Liedel took the view that the 2015 law creating the rollback is misunderstood and/or is unconstitutional. But he got two important points wrong.
The first was in discussing the manner statutes are interpreted. If the statute is clear, then that interpretation holds. If a statute is ambiguous, then legislative history applies. With the tax rate statute, which would reduce the income tax should revenues exceed the rate of inflation by a particular percentage, the legislative history is clear: The tax rate decrease was meant to be permanent. Thus, Liedel’s view that the statute does not call for a permanent change to the rate can only prevail if the statute is clear on that point.
But in discussing the statutory term “current rate” (3:21 to 3:27 and 3:58 to 5:16 time stamp), he says that it can have three possible meanings: (1) “the current inflation rate”; (2) “the current rate when the law was enacted,” which is 4.25%; or (3) “a permanent reduction … or setting a reduction that can only go down.”
Liedel believes the second possibility is “clear.” As an initial matter, I think the third is clear – if the Legislature wanted to have the rate revert to 4.25% for an annual review, it would have just used the term “4.25 rate” as opposed to “current rate.” The fact that it did not means that the Legislature contemplated a rate that could be lowered, locked in, and lowered again. But even if that is not clear (and it is), Liedel’s admission that there are three possibilities means the statute is ambiguous. This would trigger a reliance on legislative history, and no one argues the Republicans did not intend for the rate decrease to lock in and potentially be lowered year by year.
The second fundamental legal error Liedel made was in the concept of past Legislatures binding future ones (14:39 to 15:21). He claims this is improper. The concept as stated by the Michigan Supreme Court is this: “It is a fundamental principle that one Legislature cannot bind a future Legislature or limit its power to amend or repeal statutes.”
The tax rate calculation of MCL 206.51(c) is legislation. The current Legislature has the power to change that statute – it can keep the rate at 4.25% if it passes a bill through both chambers and gets the governor to sign it. The problem for the current Legislature is that members of the narrow Democratic majorities don’t want to be accused of voting to raise taxes. That is a political problem, not a legal one.
The constitutional issue does not seem to be problematic on its face. Liedel claimed it was inappropriate for the state treasurer, the director of the Senate Fiscal Agency, and the director of the House Fiscal Agency to issue a report on the General Revenue fund. Yet, the state’s budget process is largely dependent on these same three officials issuing Consensus Revenue Estimating Conference reports together. No one has contended that these revenues estimates are problematic.
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