The Mackinac Center strongly opposes the new version of HB 4001 to be considered later today. We specifically object to two provisions of the agreement:
the machinations that will deny Michiganders the personal income tax rate reduction they have been owed for at least 15 years; and
the diversion of corporate tax receipts into an ongoing, dedicated revenue stream for company-specific subsidies.
Were the “inflation relief check” proposal packaged as a separate item and not as part of a manipulation to disable the automatic tax-cut trigger, its single virtue would be that it disgorges excessive tax revenues from government and returns them to the taxpayers rather than wasting them on new programs and bloated bureaucracy.
However, abusing these checks as a means to deny permanent tax relief to our state’s teachers, first responders, barbers, retail workers, and secretaries (among others) is an insult to their hard work.
Lower tax rates help small businesses and family farms. Lower tax rates create jobs. Lower tax rates attract workers who have more flexibility than ever before on where they choose to live.
One-time checks do none of these.
The Mackinac Center has long opposed company-specific subsidies as expensive, ineffective, and unfair. However, the original approach with SOAR was somewhat less objectionable than its predecessors in that it put legislators in position to weigh the benefits and value of projects against other priorities for limited state dollars.
Creating a long-term claim on corporate tax receipts bastardizes the program and turns it into an entitlement – literal corporate welfare. The rationale for Lansing politicians to dole out SOAR shifts from “This is the clincher to bring home a project” to “Welp, the money’s there.”
Roll call votes on HB 4001 will be added to our Business Subsidy Scorecard, at a total score of $1.65 billion. From its inception, every appropriation to SOAR has been included on the scorecard; HB 4001 automatically directs $500 million in corporate tax receipts to SOAR for each of the next three years. Additionally, the placemaking grants ($50 million in each of the next three years) meet the criteria for the scorecard because they are awarded to developers to build or rehabilitate buildings.
This will also be the first bill on the Michigan Tax Hike Tracker, a new collaboration between the Mackinac Center and Americans for Tax Reform. Under current law, Michigan’s personal income tax rate would automatically drop from 4.25% to 4.05% as soon as the state publishes its Annual Comprehensive Financial Report for FY 2022. However, by creating a new fund and backdating by five months the contribution into the fund for the purpose of preventing the tax reduction trigger from taking effect, it causes the personal income tax rate to be 0.2% higher than it otherwise would have been. HB 4001 will be scored on the Tax Hike Tracker at $721.6 million, an annual average of the first five full years’ total revenue increase above current law.
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