LANSING – Despite taking the step of voting on revenue increases Tuesday, legislative Democrats and the governor said House proposals do not go far enough to restore funding for critical programs including local police and fire, college scholarships and health care for senior citizens and low-income residents.
“Now is the time to stand up for those priorities,” said Gov. Jennifer Granholm of funding for schools, college scholarships, police and fire and health care. “What we’re fighting for is Michigan not becoming Mississippi.”
All 43 Republicans stood firm in opposing the tax votes, saying residents of Michigan can’t afford to pay more to the state when the economy is hitting their pocketbooks.
And at the end of an 11-hour session, the House didn’t even end up voting on all of the intended tax bills.
In all, the chamber passed three bills: instituting a 3 percent tax on physicians that will allow the state to leverage $525 million in federal Medicaid dollars, freezing the personal income tax exemption at the 2008 level and saving $55 million and passing a vehicle bill to cut certain Michigan Business Tax credits by 15 percent. The Democratic revenue plan was first reported by Gongwer News Service.
The physician tax will collect $300 million, with $191.5 million used to trigger the $525 million in federal funds, while the state would hold onto $108.5 million. In all, the taxes passed by the House total $163 million.
Democrats estimate that if a physician has 4 percent of their patients receiving Medicaid, they will benefit from the tax bringing in higher reimbursements, which would be about 80 percent of doctors in Michigan.
The MBT credit part would bring in $116 million if the Legislature eventually goes through with implementing an actual reduction in the credits. Instead, the House sent over a shell bill to the Senate.
House Speaker Andy Dillon (D-Redford Twp.) said they have identified certain credits they wish to scale back, but instead of creating a “stir” the specific credits will be negotiated with the Senate.
Dillon said the House will act on more revenue in the coming days in order to match programs that were restored in a supplemental bill passed by the chamber last week (HB 5403 ).
The chamber did not take up an increase on non-cigarette tobacco products (HB 5355 ) after it passed out of the Tax Policy Committee earlier in the day. And talk that Democrats would move on a freeze of the Earned Income Tax Credit never materialized. Dillon said Democrats will pursue a smaller increase in the Earned Income Tax Credit, to 15 percent instead of the scheduled 20 percent.
A proposal to permit extended liquor sales is expected to be taken up Wednesday in the Appropriations Committee.
Dillon told reporters that he doesn’t believe freezing certain tax credits will be viewed by Republicans as a tax increase, but the physician tax was certainly an uphill battle for House Democrats who sat with the board open for more than an hour to collect just 56 votes on HB 5386 .
In the end, leadership was able to swing four votes in order to make it to 56: Rep. Daniel Scripps (D-Leland), Rep. Lee Gonzales (D-Flint), Rep. Jimmy Womack (D-Detroit) and Rep. Marc Corriveau (D-Northville).
“Democrats knew the public support for tax increases simply wasn’t there, especially in the absence of real government reforms,” House Minority Leader Kevin Elsenheimer (R-Kewadin) said. “There are better options – target agreements have already been reached to balance the budget without raising taxes. It couldn’t be more clear that our state has a leadership problem, not a revenue problem.”
Gov. Jennifer Granholm called the planned House action “a step towards resolving the this problem” and said the revenue that would be raised is “tied directly to funding things that people care about.”
Still, Granholm also said, “the House doesn’t go as far as I would want to go, so there is more work to do.”
After the vote, she issued a statement saying, “While there is more work to be done, I am grateful that the House Democrats have taken an important step to protect these priorities, including their support for a Quality Assurance Assessment Program that will bring significant additional federal dollars to Michigan, provide a 76 percent increase in payments to physicians who deliver care to our neediest citizens, and thereby increase access to healthcare.”
Senate Majority Leader Mike Bishop (R-Rochester) questioned using a patchwork revenue approach to shore up the budget, but he also did not immediately reject the list of proposals expected to be taken up by the House.
“Our members haven’t had a chance to see what they’re proposing,” he said. “But to this point I don’t have a single member who’s come to me and said they support any of these tactics and gimmicks.”
Of the overall approach, Bishop said, “It’s really bad public policy to try to use a Band Aid to close a gaping wound. … It’ll get us past where we need to be right now, but it’s just going to make matters worse in the future.”
But Bishop also said, “I want to make sure that I don’t come across as just anti-tax. That’s not the point. The point is trying to put in place public policy that looks to the future, that puts us in a position where we can manage this crisis.”
Senate Minority Leader Mike Prusi (D-Ishpeming) said he spoke with Dillon on Monday about the revenue package. Senate Democrats have proposed raising a number of new revenues.
“A lot of it is in conjunction with the list we already had developed,” Prusi said of the House proposals. “Some members of our caucus may have to swallow hard on some of this stuff. I still think it may fall a little short if we want to look at restoring all of the cuts. But we’ve always indicated we understand the status quo is unacceptable.”
Asked if Senate Democrats could be expected to back all of the measures, Prusi said they would first have to discuss them in a closed-door caucus meeting. He also said some Senate Democrats would prefer to see a more comprehensive tax reform plan.
The House was brought under a call of the House an hour and a half after session began Tuesday morning.
Democrats caucused with the governor, who was cheered as she left the room. She told reporters afterward the revenue increases sought are “limited” and meant to restore significant cuts in the budget.
But using tax hikes as a way to fund vital programs like education and public safety is not what Michigan should do, Republicans repeated several times during floor debate.
“We are in a zero sum game,” said Rep. Eileen Kowall (R-White Lake). “If we take from one, we give it to the other.”
House Minority Floor Leader Dave Hildenbrand (R-Lowell) said the state’s problem is that too many people are unemployed and are not paying taxes. He said lawmakers and Granholm should learn the lesson from 2007; that tax increases don’t lead to economic prosperity.
“Let’s not punish our businesses and families that are down,” he said.
Republicans tried several times to get some of their reform packages dealing with charter schools, administration of the Department of Environmental Quality and even a phase-out of the MBT surcharge tie-barred to the revenue bills, but were rejected procedurally by Democrats.
Democrats insisted the revenue increases are necessary in order to fund programs across the state. The personal exemption freeze will cost $4.35 for the average taxpayer.
“No businesses will locate in a state that abandons education and leaves police and fire,” said Rep. Andy Coulouris (D-Saginaw).
Rep. Shanelle Jackson (D-Detroit), speaking about the parallels between 2007 and now said, “The needs of our people are greater today because we could not forecast in 2007 the fall of the American auto industry.”
And she said many
