Michigan Democrats, Michigan Republicans, Taxes — December 19, 2014 at 8:28 am

Gridlock in Lansing tosses road funding decision to taxpayers but Dems get a LOT of what they wanted


Michigan’s legislature is essentially a microcosm of what is happening in Washington, D.C. A small coalition of hard-right tea party types are holding the Republican party hostage, forcing them to cut deals with the Democrats in order to actually, you know, govern. Cast in the role of U.S. House Speaker John Boehner is Michigan House Speaker Jase Bolger. This gridlock gave Democrats the ability to secure some important elements in the road funding agreement.

The battle to find over a billion dollars in road funding finally came to an end at something like 5:30 a.m. this morning. The final result does a whole lot of things but entirely depends on Michigan taxpayers raising the sales tax from six percent to seven percent. Unfortunately, we won’t be given the chance to weigh in on it for nearly six months at an election in May of 2015.

Here are some other important things in the package of 11 bills and two resolutions (much of this comes via a Facebook post by Democrat David Knezek as well as reporting by the Detroit Free Press):

  • Raises $1.3 billion to fix our roads and bridges. $1.2 billion goes to road construction with $112 million going to transit. There is also a lockdown of the School Aid Fund to ensure that only K-12 and community colleges can use these specific funds. Currently, some School Aid Funds are being used to fund universities to the tune of hundreds of millions of dollars and other random appropriations. This ensures that money collected for the classroom goes to the classroom.
  • As an offset to mitigate the regressive impact on the sales tax increase which falls more heavily on poor people as a percentage of their budget, the Earned Income Tax Credit (EITC) was restored to 20% of the federal EITC level. Recall that back in 2011, Republicans had slashed this tax break for the working poor to only 6% of the federal level.
  • Because our constitution requires it, the increased revenues from the sales tax will result in an additional $300 million per year for education as well as $94 million per year for our local governments.
  • An immediate $40 million appropriation to at-risk schools in Michigan.
  • Elimination of the 6% sales tax on motor fuel.
  • An increase in the wholesale tax on motor fuels beginning October 1, 2015. Taxing at the wholesale level is better and less prone to fluctuations in the economy to maintain a stable funding source.
  • An increase in the fines and fees on overweight trucks.
  • Guarantees warranties on new road construction. This is to say that if a contractor builds a 25-year road and it starts to fail after 5 years, they are responsible for coming back to fix it, not the taxpayers.
  • An official study on what it actually costs to educate a child here in Michigan. If we are not spending enough, we will soon know – along with how much we need to spend in order to be competitive. This comes out of legislation proposed by Democrats earlier this year.
  • Increases of $45 million in vehicle registration fees and $50 million in fees for heavy trucks. A spokeswoman for the Senate Majority Leader said registration fees for cars and light trucks won’t go up, but the 10% discounts new car buyers receive for each of the first three years they own their cars will be eliminated.
  • An increase in the registration fees for commercial trucks and a hike in the cost of registration for hybrid and electric vehicles between $25 and $200.
  • A commitment to hiring more minority and women workers in the construction industry.

Again, much of this won’t happen until voters approve the sales tax increase in May.

I’m impressed by the negotiating skills of our Democratic caucus. They used the internal gridlock within the Michigan Republican caucus to their advantage and, more importantly, OUR advantage by securing some important gains for education and funding going to our municipalities. As Democratic House Leader Tim Greimel put it, “For the first time in four years, we were able to forge an agreement that offers voters the option to generate the revenue we need to finally fix and maintain our roads, while also giving families much needed tax relief, and increasing funding to our schools and local governments. This is a victory for Michigan residents.”

Detroit Democrat Thomas F. Stallworth III, chairman of the Detroit Caucus and Michigan Legislative Black Caucus, had this to say:

By including my legislation to increase hiring of women and minorities in the construction industry, we ensure that Michigan workers will benefit from the road work created by this new roads funding. Taxpayers can vote for this ballot proposal knowing that they will voting to create new jobs for their family members, friends and neighbors, as well as fix our roads.

This is not only a victory for Democrats, it’s also a repudiation of the tea partiers in our state legislature who seem to think we can repair our roads without generating more revenue to pay for it. Their fairy tale thinking didn’t prevail and, once voters approve the sales tax hike, their wishful thinking and out-of-touch worldview will be consigned to the rubbish bin of Michigan history.

[Photo credit: Anne C. Savage, special to Eclectablog]