LANSING – Proposals to raise the state’s taxes on tobacco and liquor and to preserve a state tax on estates, all key pieces of Gov. Jennifer Granholm’s budget recommendation, will receive their first major votes this week in the Republican-controlled House.
The forecast is gloomy for the liquor tax increase and the estate tax measure, which would maintain a state levy on estates that is now scheduled to expire in tandem with the federal estate tax. The prospects for raising the tobacco tax are brighter, but a number of lawmakers said Tuesday that they expect it to fall short of passage this week as a precursor to eventual victory.
It was unclear whether the House would vote on the 75-cent per pack increase Granholms recommended or the 81-cent per pack hike House Speaker Rick Johnson (R-LeRoy) has said he prefers so that Michigan would have the No. 1 tobacco tax in the country at $2.06 per pack.
House Majority Floor Leader Randy Richardville (R-Monroe) said the House would first vote on the liquor and estate proposals, but he expected they would have far less support than a cigarette tax increase.
“We’ll see how the first one or two go,” he said. “We’re going to put it up and let people tell everybody where they are.”
Granholm has proposed the three tax measures as a key piece to bridging a $1 billion shortfall between available revenues for the 2004-05 fiscal year and existing spending.
A 75-cent per pack tobacco tax increase would raise $295 million in new revenue. The liquor tax increase would raise the state mark-up from 65 percent to 74 percent, generating money to fully fund grants to municipalities providing fire protection to state buildings in their jurisdiction and another $32 million for the state’s general fund. Maintaining a state tax on estates would raise $94 million for the 2004-05 fiscal year and $130 million in new revenue for a full fiscal year.
All three measures will be moved to the full House for votes without any committee action. When the House votes, most see the vote on the cigarette tax as setting the stage for a firm vote on the issue later this spring, perhaps on a smaller increase.
“I predict the demise of all three of them initially,” said Rep. Lorence Wenke (R-Richland). “I think enough votes will eventually be found on the Republican side for the tobacco tax.”
There are strong pockets of opposition on the Democratic side, principally among lawmakers from poorer districts and those from politically competitive districts. Johnson has compared his expectations of Democratic support for Ms. Granholm’s cigarette tax increase to the support he generated among Republicans for the 50-cent per pack tobacco tax hike Governor John Engler proposed in 2002.
At that time, about 70 percent of the House Republican caucus supported the increase. That would equate to about 33 of the 46 House Democrats this session. House Minority Leader Dianne Byrum (D-Onondaga) said Tuesday that she expected “broad support, not unanimous” for the cigarette tax proposal.
Byrum said she had not expected a vote so soon on the estate and liquor proposals and did not have a sense of the level of Democratic support for those measures.
Granholm press secretary Liz Boyd said the administration is hopeful and optimistic that the House will pass its tax measures. If the House defeats them, then it will be up to Republicans to offer alternatives that balance the budget without further spending cuts because programs cannot sustain any more reductions, she said.
“The governor’s budget is based on their approval of those taxes,” she said. “Without revenue, we would have to cut programs beyond what we already have cut.”
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