LANSING – In the last hours before it left for a two-week break, the Michigan Senate quickly moved a series of tax credits that supporters said would help the state’s real estate market and boost the economy – by suspending the application of the pop-up tax when houses are sold and increasing property tax credits.

But opponents argued the state was taking a major revenue without fully considering the consequences.

What the total cost of SB 790 , SB 791 , SB 1095 and HB 4215 would be to state revenues was unclear, although there was one estimate of possibly $150 million in the first year of application.

The Senate also acted on the bills after it had spent the week passing proposed budgets for 2008-09 without revising the expenditures downward to reflect the potential revenue costs.

“What has happened to all my good fiscal conservative friends? You slash $150 million in revenue without any corresponding spending cuts,” said Sen. Michael Switalski (D-Roseville).

But supporters said the state was in a crisis in terms of selling houses. Sen. Roger Kahn (R-Saginaw Twp.), in fact, said the state was in a depression when it came to housing. In Saginaw, as many as 50 percent of the city’s homes were for sale or unoccupied, he said.

Sen. John Pappageorge (R-Troy) said the measures would more than help make up for the short-term losses by encouraging home sales.

The legislation is different to House-passed measures, HB 4440 and HB 4441 , Senate Republicans said, because the Senate versions were designed not to hit local government revenues and school aid funds. The House bills would put a moratorium on the pop-up tax for 18 months while increasing the real estate transfer tax to hold some communities harmless from the revenue lost.

Senate Majority Leader Mike Bishop (R-Rochester) said the Senate bills should “provide immediate relief to home buyers and should boost Michigan’s sluggish housing market.”

And while a number of Democrats warned that the bills would cut state revenues – and complained that members were voting on the bills without knowing what estimates were for the changes – most Democrats voted for the bills.

SB 791, passed 32-5, effectively suspends the full pop-up tax – the increase in a home’s taxable value to its market value when it is sold (a provision created with the 1994 passage of Proposal A) – for a three-year period, and estimates put the cost for the current fiscal year at as much as $75 million.

Under the bill, persons buying a property between April 1 of this year and January 1, 2011, would be able to claim a property tax credit that equals the difference in the assessed tax before the property was sold and after it was sold.

SB 790, also passed 32-5, boosts the income cutoff for a person to be eligible for the state’s property tax credit from the current $73,650 to $83,650. The maximum credit is phased out by 10 percent for each $1,000 over that income level.

SB 1065 , passed 34-3, increases the total homestead property tax credit from $1,200 to $1,300. It would be the first increase in the credit since it was created in 1976, and Sen. Gerald Van Woerkom (R-Norton Shores) said the credit would be paid out of the income tax to help prevent local governments and school districts from taking a hit.

He said in the first year the change could cost the state $25 million but that could jump to $200 million in the second year.

HB 4215, passed 37-0, would allow a person who has moved into a new home to keep a principal homeowner’s property tax designation on their unsold, unoccupied old house for up to three years.

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

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