LANSING – A significant cut to businesses – along with more cutbacks in state government spending – will be offered next week by Senate Majority Leader Ken Sikkema (R-Wyoming).
Sikkema gave only sketchy information about what he will lay out for consideration, but told the Senate following approval of the $1 billion securitization package that “time is of the essence.” He said a “significant” tax cut is a critical piece the state can do to help invigorate the economy.
The proposal, envisioned for a vote in the Senate next week, will be a reworking of the tax cut package approved by the House in August.
“We have to send the message that we’re committed as a state to turning this economy around,” Sikkema told reporters.
He said in order to come up with the resources to pay for the cuts – something he found lacking in the House-passed plan – “I am going to propose significant spending reductions over the next six years.” A previously-introduced constitutional amendment in the Senate (SJR D), which has not yet had a committee hearing, would tie spending growth to population changes and inflation.
Sikkema said it will offer immediate tax relief, which he said is possible because he was able to identify some funds to pay for it without taking it out of the budget. The majority leader had previously said he could not support the House-passed approach which would have cut revenues for the current fiscal year by $142 million, according to a Senate Fiscal Agency analysis. (The House Fiscal Agency had estimated a $21.6 million impact).
“I’m going to offer a tax cut in ’05-’06, but not that high,” he said of the $142 million estimated impact. “The plan I will offer will offer significant tax relief. I will not take it from the budget.”
A previous briefing with his caucus also revealed that the plan will include some triggers that will determine how much in tax cuts will be provided in future years.
Sikkema had found the governor’s proposal flawed because, although it offered deeper cuts to manufacturers more quickly than does the House plan, it balanced those cuts, and a cut in the rate to 1.2 percent from 1.9 percent, with sharp increases on other businesses. Under the House plan (HB 4980, HB 5106, HB 5107, HB 5108, HB 5095, HB 5096, HB 5097 and HB 5098), tax cuts were more gradual and generally left unspecified holes in future budgets as it cut revenues by $1.67 billion over five years.
The House plan would have cut the rate to 1.8 percent, from 1.9 percent, in 2007 plus additional cuts before the tax would be repealed in 2010, and the rate would be gradually shifted so it is based entirely on sales. It would also give manufacturers a credit for industrial personal property purchased in 2006 and 2007 plus a credit for personal property taxes beginning in 2006, and all businesses would see health care costs removed from the SBT base over a several year period.
The Senate in June had passed a different proposal that gradually phased out the SBT, beginning in 2007 and lasting through 2025.
In renewing her call for action on tax restructuring, Granholm said a plan should include tax credits for manufacturers, a cut for research and development companies and a rate cut for small businesses.
Senate Finance Chair Sen. Nancy Cassis (R-Novi) said she is ready to get going on the tax cut plan. “It is time now,” she said noting the hearings all spring that the Legislature had held on the governor’s restructuring plan. “I’m pleased because what we will see are unfettered tax cuts.”
State Budget Office spokesperson Greg Bird reserved comment on any budget cuts until seeing the proposal, but he added, “Over past few years, we have cut a significant amount from budget already. We would hope that if a plan is presented that takes revenue away from the budget that they would provide corresponding cuts.”
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