LANSING ? Gov. Jennifer Granholm said Monday, as she vetoed two tax bills, that the Michigan legislature created a situation that allowed the high tech jobs development portion of the $3 billion economic stimulus plan to move forward, but she demanded the legislature immediately take action to enact the tax cut agreement announced earlier this month.
The two bills vetoed, HB 5096 and HB 5107, would have created new loopholes for businesses, Granholm said. She also said the Legislature must repeal the 2009 sunset of the SBT now in law. Unless that sunset is repealed, individuals in the state will see the costs of government shifted onto them, she said.
“I do not presume to know” what was the legislative strategy in organizing the various tie-bars to the 25-bill tax cut/jobs package, Granholm told reporters at a press conference held at the Neogen headquarters in Lansing, but “we are grateful” they set up the situation.
“This is great news for Michigan,” Granholm said, and means – when the $1 billion in tobacco funds are combined with $1 billion in private investment – Michigan will be able to invest more than any other state into new technology companies. Part of the tobacco funds will be securitized to raise $400 million and $75 million more will be added directly over an eight-year period.
But the state still needs to see business tax relief enacted, Granholm said, and the proposal sent to her would have enacted a “business tax cut resulting in a tax hike on our citizens.”
The governor’s action was attacked by Republican state chair Saul Anuzis as a politically motivated attempt to pick winners and losers among companies and do nothing for the state’s manufacturing industry. He also said she ignored legislative intent with the package and created a “huge political slush fund.”
The action by the governor gained additional political edge by the General Motors announcement that it will cut 30,000 jobs by 2008, with four plant closures in Michigan. It was GM’s deepest cutbacks in 13 years.
“It’s shameful that on a day when General Motors announced massive job losses, the governor abandoned immediate tax relief for job providers,” Senate Majority Leader Ken Sikkema (R-Wyoming) said in a statement. “This was a chance to provide tax relief for everyone, from large manufacturers to small businesses. Given Michigan’s economic troubles the governor turning her back on job providers and job seekers just doesn’t make sense.”
Granholm said the Legislature had to act on a proposal to provide a 100 percent personal property tax break on companies that consolidated their operations into the state, seen as a move to help attract the Delphi Corporation’s plants.
All the other bills in the tax package have been signed, but Granholm said, “The rest of the tax package will fall until the Republican leadership gets back to work and sends me a bill to offer the help businesses need.”
And she stressed, “Send me a bipartisan package I can sign.”
The strategy on the economic development package almost hearkened back to the ability of former Governor John Engler to catch the Legislature in its own web.
While the jobs development package was tie-barred to many of the tax cut bills, it was not tie-barred to all of them, including HB 5096 and HB 5107, the two vetoed bills. All the tax cut bills were tie-barred to each other.
In addition, the tie-bar section of HB 5047, PA 225, which is the jobs development bill, says that it will not take effect unless other listed bills in the tax package “are enacted into law.”
Enacted into law means signed by the governor and given a public act number, legal counsel to Granholm said. Had the Legislature included the phrase “and effective” to the tie-bar section then the economic development portion could not go into effect, the officials said.
The Executive Office consulted with Attorney General Mike Cox’s office before proceeding, and cited the constitution (Article 4, section 33), and a 1976 attorney general opinion, No. 5019, and a 1984 opinion, No. 6201; and a Court of Appeals case (People v. Belange, 120 Mich App 752); and a Supreme Court opinion (Stable v. Township of Battle Creek 346 Mich 64) as backing up their position.
“This will be the best way for Michigan to compete in the 21st Century. We are now taking the steps to add growing sectors to our economy,” Granholm said, and over a 10-year period could create 72,000 jobs.
Granholm and legislative Democrats are urging Republican leaders to come back to the negotiation table and fix portions of the vetoed bills.
“Republicans should only have one priority when they get back to Lansing – send me the bipartisan package,” Granholm said. “They can fix the problem they have created. They need to get back to work and finish the job.”
Granholm said there are more tax structure options that can be investigated, but maintained that repealing the SBT sunset is an important step. The governor said she would not support an increase on the sales tax, a proposal that has been floated around among others by Rep. Fulton Sheen (R-Plainwell), chair of the tax policy committee.
Touching on the GM plant closing subject and the timing of her announcement, Granholm said, “I very much understand the problem our manufacturers face. I am very concerned for families and communities. This announcement today underscores why diversification is important.”
Employees switching over to other plants in the state, as well as deleting positions through attrition instead of massive layoffs is “perhaps, the silver lining,” in the news, Granholm said.
One of the key components of the business tax plan must be the 100 percent personal property credit for corporations that choose to reconsolidate their business in Michigan, she said.
However, Granholm recognized that the business tax cuts in the package would not be enough to stave off plant closings, to which she urged for work on a restructuring plan.
“The level of tax cuts and where they have been targeted are on the margins,” she said.
Granholm then said that at least the package gives some incentive to corporations looking at plant closings.
Asked whether leaders should simply go back to the drawing board and dump the business tax cut plan.Granholm said, “We want the tax piece.”
House Minority Leader Dianne Byrum (D-Onondaga) said because of the Thanksgiving holiday it would be hard to get lawmakers back to Lansing to vote on any proposal. However, she added, “That does not mean discussions can’t continue between leadership. The governor is in town.”
While DeRoche has called the package a “first step,” with work still needed on the business tax structure at a later time, he came down hard on the governor for not providing immediate relief to the struggling manufacturing industry.
“The governor had the opportunity today to do something to help manufacturing in Michigan and she failed,” he said.
DeRoche’s spokesperson Matt Resch said the Republican leadership would look over Granholm’s vetoes and take action when they return for session after Thanksgiving.
Sikkema spokesperson Ari Adler said it is possible Republican leaders could speak over the break on strategies to get the business tax cut plan passed, but said that now was a time for legislative leaders to regroup.
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