LANSING – House Speaker Andy Dillon (D-Redford Twp.) said Friday he is not resigned to the idea the newly minted services tax needs to be changed, but after a week of it being flogged by business groups, he’s open to altering it if the voters signed off on a 1 percentage point increase in the sales tax.

Dillon, appearing on Michigan Public Television’s “Off the Record,” said such a ballot proposal, if it received two-thirds support of members in both legislative bodies, could go on the January 15 presidential primary ticket if a service tax continues to receive criticism. He said if the voters approved the sales tax bump from 6 to 7 percent, part of the services tax could be cut out, not all of it. But he also said voters could be given more carrots, like a homestead property credit, in exchange for approving a sales tax hike similar to the 1994 school finance reform Proposal A.

But he said already one company, which he would not name, has realized its liability under the tax was overestimated. He said officials for the company previously believed they would be paying nearly half of the more than $600 million to be raised by the tax when it goes into effect December 1, but after talking with officials from the Department of Treasury they changed that figure.

Dillon said it would be important for the department to talk with more businesses in the coming weeks so that everyone can be educated on the new tax.

Putting a sales tax proposal before the voters was a hot topic early in September, when it was floated by Senate Republicans, but it didn’t receive enough votes in the House nor did the Senate vote on the matter and it died as the deadline for getting on the November ballot passed.

Dillon said it would be a challenge to get rid of the service tax in exchange for raising the income tax since the public is aware the new income tax rate just got increased from 3.9 to 4.35 percent. But Dillon did not count the possibility of doing that out either.

The Democratic leader said he grew aggravated late in the weekend as a proposal to raise the income tax to 4.7 or 4.75 percent was floated because he said he had been told previously in budget negotiations that that was too high of a price tag. He said with figuring out all the exemptions and changing the rollback, there wouldn’t have been enough time to get the higher rate done and avoid a government shutdown, even though technically the state did experience a shutdown of several hours Monday.

“It was frustrating because I had been saying for weeks the lower you go on the income tax the bigger problem you’re going to have with a tax on services,” he said.

In fact Dillon said he only knew of the categories of services eligible for a tax that Sunday and he had left it up to his people to determine what exactly would be on the list as it was reported out of conference committee. Asked why he didn’t know the details, Dillon said he was putting out other fires at the time but did not elaborate.

During the show, Dillon reflected on the months he has spent as speaker and the budget battle that has taken up most of that time. While three weeks before the new fiscal year he said there were 10 House Republicans waiting for Senate Majority Leader Mike Bishop (R-Rochester) to give them a signal in order for them to vote for a tax increase, Dillon said that never came and it wasn’t until the last hour he felt the Senate put up a solution.

While Dillon railed on the partisanship of the whole ordeal he was asked if he wasn’t too playing politics by not letting Democratic House members to vote for a tax increase. Dillon said he had members tell him they knew a vote like that would end their political career, but they were willing to do it if it was part of a budget agreement. Dillon said trust between the two chambers was the reason everything went into the new fiscal year, but he added that problem didn’t extend to the executive office. Asked about rumblings that some House Democrats have issues of trust with the governor, Dillon said he’d let her answer those kinds of questions.

Dillon said the caucus is prepared to fight any recall attempts of its members, but he believes the public will think “at least we stood up for something,” whereas House Republicans didn’t vote for an all-cuts solution, only two voted for an income tax increase, and not every GOP member was on board with the health care pooling, MESSA issue (SB 418 ).

Dillon said they will have to make the case to the voters for why Democrats supported a tax increase, focusing on how historic the times are, but he regretted not getting Democrats and Republicans alike on board for a cuts, reforms, revenues solution earlier in the year. He said the public is questioning whether a budget could have been balanced without revenues because for so long Republicans postured that it could (even though he said the Senate never passed an all-cuts solution to the $1.7 billion question).

Asked then why he didn’t sign off on Governor Jennifer Granholm’s budget proposal in February that included a 2 percent sales tax on services, Dillon said he wasn’t sold on the idea originally, he was still new to politics and particularly new to being a legislative leader and he had members who were skittish about the idea and wanted it to percolate longer. But he said the Senate then killed the proposal a month later.

“I didn’t buy into it right away but I’ll tell you come September it started to look more attractive,” he said.

With the Michigan Chamber of Commerce proposing a ballot change to term limits and possibly putting a requirement that the budget be done by June 30 of each year, Dillon said the idea initially sounds attractive but he wanted to talk with Senate Appropriations Committee Chair Sen. Ron Jelinek (R-Three Oaks) because the senator has been around longer and is not supportive of the proposal.

Matt Marsden, spokesperson for Bishop, said Dillon’s comments on the services tax sounded like “buyer’s remorse,” and that if the Democrats hadn’t insisted on tying a continuation budget to revenues then better discussions on the matter could have proceeded.

“I’m not sure why it ended up as part of the deal in the first place,” Marsden said, adding that since a services tax was the governor’s “pet project,” Dillon would have to take the issue up with her.

Liz Boyd, spokesperson for Granholm, said the state needs a balanced budget and the Legislature sent a bipartisan solution to her desk to do that with the services tax. The governor is willing to consider any new proposals that achieve a balanced budget but she doesn’t want to increase the tax burden on citizens.

Marsden said lawmakers should now be focusing on appropriating the 2007-08 fiscal year budget before November. Earlier in the week Bishop had said he would be willing to make a trade for getting rid of the service tax, which could include doing more budget cuts, but that any changes including a boost again to the income tax would have to be proposed by Democrats.

Todd Anderson with the Small Business Association of Michigan, which has been leading a growing coalition calling for the service tax repeal, said doing a sales tax increase would be the lesser of two evils, but that they remain focused on getting the Legislature to eliminate the new tax or take it to the ballot.

An EPIC-MRA poll of 600 people from August showed that 60 percent were opposed to a sales tax increase (47 percent of those were strongly opposed), while 35 percent said they either somewhat or strongly in favor of the increase. There was a margin of error of 4 percent and 5 percent of the people surveyed were undecided.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

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