Michigan Taxes Rise

Yesterday afternoon the Michigan Senate passed the House’s Road Funding Plan with some changes, it passed 20 – 18 with 19 Republicans and 1 Democrat (Senator Virgil Smith) voting yes.

Then around 10:30 p.m. last night, the House approved the changes voted on in the Senate for higher fuel taxes and vehicle fees on 54-53 and 55-52 votes.

The main points are as follows:

• A 7.3-cent increase in the 19-cents-a-gallon gas tax and an 11.3-cent hike in the 15-cent diesel tax in 2017. They believe this will raise $400 million annually with automatic yearly inflationary increases to both taxes in 2022 and beyond;

• A 20% rise in license plate fees in 2017, which they believe will bring in $200 million annually. This increase in registration taxes will average $20 more per passenger vehicle, along with fee increases of between $30 and $100 for hybrid electric vehicles and between $100 and $200 for non-hybrid electric vehicles.

• A dedicated annual shift to roads from the $9.9 billion general fund beginning with $150 million in the 2018-19 fiscal year, $325 million in 2019-20 and $600 million in 2020-21 and after.

• A yearly reduction in the 4.25% personal income tax, starting in 2023, if general fund revenue growth outpaces the rate of inflation times 1.425%..

• An expanded income tax credit for homeowners and renters, those earning up to $60,000 are eligible this is above the current $50,000 limit. The maximum credit rises from $1,200 to $1,500 and the income multiplier is higher.

There you have it, a new road funding bill, like it or not it will soon become law because Governor Snyder is expected to sign the bills.

The main differences between the Senate plan that passed and the House plan that passed last week is as follows:

• The Senate plan increases vehicle registration fees by 20%, starting Jan. 1, 2017. The House plan increased registration fees by 40%, with the increase taking effect one year earlier, on Jan. 1, 2016.

• The Senate plan has a higher fuel tax increase, 7.3 cents per gallon, effective Jan. 1, 2017. The House plan increased taxes on regular fuel by only 3.3 cents per gallon, effective Oct. 1, 2018.

• The Homestead Property Tax Credit under the Senate approved plan would allow more people to qualify for the credit over time, through a change in the eligibility threshold tied to inflation.

• The Senate plan provides for an income tax rollback starting on Jan. 1, 2023, with Michigan's personal income tax rate decreasing only if general fund growth exceeds inflation by 1.425%. The House income tax rollback plan would have taken effect starting Jan. 1, 2019, as long as general fund growth exceeded the rate of inflation, even if that growth was below 1.425%.

Governor Snyder believes the increases in the vehicle registration and gasoline taxes will cost the average Michigan motorist approximately $60 per year.

The Democrats did not like these plans because they believed they are fiscally irresponsible and hit the lower classes harder.  They wanted businesses to pay higher taxes to cover the cost, apparently they do not know that businesses do not pay taxes the people who buy their products or services do.

That said it is predicted that the income tax break would save the average Michigan family with an income between $20,000 and $30.000 a year approximately $100 to $200.

Well if the average Michigan family will pay an increase in their vehicle registration and gasoline taxes of approximately $60 a year but eventually will have their income taxes lowered $100 to $200 a year, sounds like a tax break.  Are the Michigan Democrats against lowering the taxes of the lower class?

According to the American Petroleum Institute, Michigan will go from having the 12th highest taxes on gasoline to the fifth highest in the country.

Let’s discuss this today on my program, The Live with Renk show, which airs Monday through Friday 9 a.m. to noon, to let me know your thoughts at (269) 441-9595.

Or please feel free to start a discussion and write your thoughts in the comment section.