Cut taxes vs public investment: What Michigan’s fiscal tug of war means to you

paying taxes

Lawmakers want a tax cut. The governor wants billions more for schools, roads and water safety. Are we taxed too little or too much? We explain what it all means to you – in 11 bite-sized reports.

Michigan is on a financial collision course.

Barreling into the crossroads from one direction is the Michigan Legislature, where conservative leadership has spent this year pushing hard for budget and income tax cuts. As GOP House Speaker Tom Leonard put it: “We want to put our hard-working taxpayers first.”

Barreling in from the opposite direction are three-dozen outside advisors to Republican Gov. Rick Snyder, including many from the business community. They call for at least $6 billion a year in new government spending. Their reasoning: That’s the responsible price tag to fix Michigan’s laggard public school system and repair aging roads, bridges, and water infrastructure.

This tug of war between cutting taxes and spending and even more public investment is Michigan’s defining question now, and well into the future. To navigate it, here are 11 things every Michigan taxpayer should know:

About The Author

John Bebow

John Bebow is president and CEO of the Center for Michigan. Prior to joining the Center in 2006, he worked for 16 years as a professional journalist.

Mike Wilkinson

Mike Wilkinson is Bridge’s computer-assisted reporting specialist. He can be reached at mwilkinson@bridgemi.com.

Ted Roelofs

Ted Roelofs is a Bridge contributor based in Grand Rapids. He can be reached at ted.roelofs@gmail.com

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Comments

John Saari
Tue, 05/09/2017 - 9:22am

Stop spending more than you have. Pay off your debts. Ask the people what they want to pay for. What has happened to common sense.

***
Tue, 05/09/2017 - 9:40am

A state can't tax cut its way to prosperity, it is no use trying to talk to the ideologues in the state legislature about this, they will never accept that. I look for Michigan to keep on the dismal financial road it is on for the forseeable future.

Nat Pernick
Tue, 05/09/2017 - 10:29am

Michigan supports idolatry. We worship billionaires, and do pretty much what they want. A further reduction in the income tax will not affect most people much, but it will help feed the insatiable greed of Betsy Devos and other super wealthy individuals who want us to bow down to them.

Matt
Tue, 05/09/2017 - 4:44pm

For all the greed you refer to, they've sure given a lot of money away. Grand Rapids wouldn't be the same without them. Or is it that you just disagree with their ideas?

Rick
Sun, 05/14/2017 - 10:46am

Amway was and is a pyramid scheme. It preys on the poor and convinces them that they'll become rich. And they don't but the DeVos family does each time a sucker buys their pitch.
The DeVos family spends millions on influencing our elections and making all of us poorer while they pay less and less.
Nothing to be proud of - at all.

Dave B.
Tue, 05/09/2017 - 3:19pm

As a conservative senior citizen who spends winters in Florida, the difference in road and infrastructure quality is immense. Michigan's infrastructure is literally falling apart. But I nor anyone else wants to pay much more taxes. Meanwhile, the Feds are pushing more funding burden to the states. Government efficiency could be improved dramatically, but likely not enough waste could be eliminated to fund the needed changes. Raise taxes too much and we'll live 6 months and a day out of state and declare Florida as our primary residence, so tread carefully.

Rich
Wed, 05/10/2017 - 11:41am

You should go to one of the becoming a Florida resident seminars , and you will find that what you think is not true. Where you want your residence to be depends on how you act - where is your driver's license from, what is the address you put on your federal tax forms which should also be the same as your state tax forms, what address does your bank or financial institution use, where are you registered to vote, etc. You can live in Florida 7 or 8 months a year and still be a Michigan resident as long as every document you have points to the fact that Michigan is your residence. Now why would one not want to be a Michigan resident. The biggest reason is that one only pays 60% on 1099R type income (pensions, minimum distributions, etc.) if born before 1953, or 0% if born before 1946 or something like that. What that has to be balanced against are the tax consequences such as 18 mills added to your Michigan property tax if you don't have the homestead exemption, or taxable income on the gain on your second home which could be your Michigan home if you have declared Florida as a residence, or health insurance rates for supplemental Medicare insurance.

It's a big game that you have to watch all the time to minimize your tax payment.

Anna
Sun, 05/14/2017 - 10:45am

Not quite true about the tax rates. Retirees born after 1953 now pay MI state income tax of 4.25% on 60% of their 1099R income. That amounts to 2.5% income taxes on pension income. Withdrawals from a 401k-type plan are taxed at the 4.25% rate. This is in contrast to Florida, which doesn't have a state income tax. Florida does, however, tax both property and corporations more heavily than Michigan does.

Kevin Grand
Tue, 05/09/2017 - 4:35pm

So, to Messrs. Bebow and Wilkinson, when are you going to get to the part about Gov. Snyder's budgets going from $47-billion when he took office to almost $55-billion just last year?

And before you use the pat response that not all of that money in that budget is state money, the overall state match from ALL MICHIGAN SOURCES went from $25-billion to almost $32-billion during that same time span?

Those are all SFA numbers, BTW.

I'm also curious as to why you chosen to ignore the history regarding WHY things like the Headlee Amendment came to pass here in Michigan, along with similar initiatives nationally like Proposition 13? Those initiatives didn't just magically spring into being immediately.

How is looking at only one side of the equation considered a balanced report?

Where is the focus on legislative priorities in regards to state spending?

Where is the focus on the tired argument that elected officials use regarding funds restricted by statute? Statutes were written into law by previous legislatures, they can just as easily be re-writted by new ones if the will to do so is there.

Where is the focus on the crony capitalism displayed by current and former elected officials (i.e. MSP HQ, Capitol View, and "Gilbert Bills" just to name a few). It's difficult for elected officials to argue that they are broke and practicing fiduciary responsibility, while simultaneously rewarding donors with public money.

And those are just a few examples of the "inconsistencies" in the argument that more "public investment" is even necessary.

This Bridge Reader is curious about why those items are rarely, if ever, broached?

Matt
Tue, 05/09/2017 - 4:40pm

Rather than wading into the more spending verses more tax cuts, maybe it's time that Michigan asks whether we are getting our money's worth out of our current structures and systems. Does our current government structure with the layers from townships and villages to cites and counties, along with all the other various boards, commissions and districts make financial sense or otherwise or are they expensive anachronisms from the horse and buggy days? Does our very subjective and administratively expensive property tax system make any sense? Or is it possible to tax real estate without all the silly and expensive"valuation" nonsense. Our prison system?? How many inmates are really a danger to the public and need to have the big expenditures to keep them in prison? My suspicion is that if these and other functions were brought into modern management practices, there is money for both tax cuts and spending increases locked up in these and other state and local government areas. The trick is how to force them to do it.

Mark
Tue, 05/09/2017 - 6:31pm

There is no doubt about it, we need to cut Taxes in Michigan. Michigan is in the top 10 for Property Taxes in the country. Under Gov Snyder's administration, spending has increased ~$6Billion. I was fortunate enough to being a younger retiree to accept a buy out retirement after 34 years of employment only to get my pension taxed. My car registration fee this year has nearly doubled. Seniors like my wife and I never having children, continue to pay high taxes to support schools. We are paying for Detroit's bailout, we are paying for Detroit Public Schools bailout.....WHY? WHY? WHY? We have the highest auto insurance rates in the country. We need to join the rest of the country in having a part time legislature to make sound decisions. And then we wonder why Michigan has the least population growth in America. Damn you Democrats and Republicans.

Paul Jordan
Sun, 05/14/2017 - 3:27pm

"Taxes are the dues we pay for living in a civilized society".