SaveMIcity Information: Proposed Income Tax Elimination Jeopardizes Services You Rely On

As part of the saveMIcity initiative we wanted to make sure you are aware of the effort in the Michigan House to eliminate the state income tax. Let’s face it, nobody likes to pay taxes. But we do like the services those taxes support – police and fire protection, road maintenance, schools, libraries, parks, street lighting, drinking water, and the list goes on and on. While it feels good to “cut” taxes, if the House ultimately approves this plan it would result in $3 a week cut to someone making $50,000 a year. There’s no real plan for revenue replacement of the income tax. The impact of such a major tax cut would be detrimental to all the services we rely on.

State Treasurer Nick Khouri testified in opposition to the bill and said the administration has serious concerns about the bill, noting that the first step would cut $1.1 billion out of the state’s combined general fund and School Aid Fund coffers. Also opposing the bill, called House Bill 4001, were the Michigan Municipal League, the education community and the Michigan League for Public Policy. All these groups urged the committee to consider the budget consequences of such a reduction. And Governor Snyder on Facebook Wednesday scolded House Republicans saying he was “disappointed” that a legislative panel advanced a sweeping plan to cut and eventually eliminate Michigan’s $9.7 billion personal income tax after a single 90-minute hearing.

The impact of eliminating the income tax would be devastating on not just Michigan communities, but on every person in the state.

This proposal will not create jobs or stimulate our economy as proponents claim. From an article in mlive.com: “The sponsor, Republican Rep. Lee Chatfield of Levering, said cutting the ‘work tax’ would spur economic growth and allow people ‘living paycheck to paycheck to see meaningful tax relief. This allows them more buying power. It allows them to keep more of their hard-earned dollars in their pocket.'”

Let’s provide context to the buying power some claim this would create. One of our saveMIcity supporters provided this example:  For a single person making $10 an hour full-time they would be making about $20,400 per year. This reduction for this person would save them $1.40 per year.  That’s ONE DOLLAR and FORTY CENTs – over a year! For a  person making $15 an hr full-time, they would make about $31,200 per year. The cost savings for them?: $39.20 year or 76 cents per week. A person making $50,000 a year would see a tax cut of $175 — about $3.37 per week or 48 cents a day. Is this kind of savings truly worth drastic reductions to the services people have come to expect? We think not.

This bill will create a $680 million budget hole in the first year, and cost the state up to $9 billion or even more when the income tax is fully eliminated. Michigan has already endured years of cuts to services people rely on every day and has seen the consequences in public crises in Flint and other communities. Cutting the income tax will exacerbate these problems and leave our state unable to invest in our schools, colleges and universities, air and water, communities, bridges and roads, healthcare and public safety—the things that actually fuel economic growth.

If you’ve attended one of our many saveMIcity presentations, you’ve heard us explain how Michigan’s system for funding local governments is broken and needs to be fixed. The current system simply will not allow for any additional cuts to state support for municipalities.

If you agree this proposal creates more harm than good, then help us oppose this bill by contacting your State Representatives and letting them know how this proposal will hurt your community and their constituents. Go here to get the contact information for your state Representatives: http://www.house.mi.gov/MHRPublic/frmFindARep.aspx.

Please tell your lawmakers to oppose HB 4001.

If you have any questions about this, feel free to email us at savemicity@mml.org.